Comments on: A template for Calendar trades http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/ Thoughts, Trades, and Instruction for Profiting from Options the Smart Way Sun, 05 Feb 2012 11:34:41 +0000 http://wordpress.org/?v=2.0.3 by: TradingMule http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-625 Sat, 03 Jan 2009 20:40:03 +0000 http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-625 This is a great template. However, the adjustment strategy is based only on price movement. Recently in my calendar trade I came across a strange situation. Even though I started off with volatility of my long option below the 12 month 1/4 range, I think due to low holiday trading volume, the price was pinned at the strike price but the volatility came crashing down by 15%. Usually IV and price are approximately inversely proportional, but in this case the volatility dropped but the price remained pinned. This has caused, even though the price remained well under the breakevens, the profitability to drop drastically. What would be the adjustment strategy then, 1. Cannot roll up/down as the price has remained pinned. 2. Double up at the same strike to average out the volatility? 3. Walk away with +/-3% P/L with 2 weeks to expiration. Any ideas? This is a great template. However, the adjustment strategy is based only on price movement. Recently in my calendar trade I came across a strange situation. Even though I started off with volatility of my long option below the 12 month 1/4 range, I think due to low holiday trading volume, the price was pinned at the strike price but the volatility came crashing down by 15%. Usually IV and price are approximately inversely proportional, but in this case the volatility dropped but the price remained pinned. This has caused, even though the price remained well under the breakevens, the profitability to drop drastically.

What would be the adjustment strategy then,

1. Cannot roll up/down as the price has remained pinned.
2. Double up at the same strike to average out the volatility?
3. Walk away with +/-3% P/L with 2 weeks to expiration.

Any ideas?

]]> by: Martin http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-149 Thu, 21 Aug 2008 07:45:29 +0000 http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-149 Doesn't look like anyone's reading or responding to comments, but hey, I'll try... I'm also curious about "Std Dev move to expiration" -- but also about the sorts of adjustments that you make to your calendars. I assume you're not simply talking about rolling up the short leg to the next month, right? -- Martin Doesn’t look like anyone’s reading or responding to comments, but hey, I’ll try…

I’m also curious about “Std Dev move to expiration” — but also about the sorts of adjustments that you make to your calendars. I assume you’re not simply talking about rolling up the short leg to the next month, right?

– Martin

]]> by: Bob http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-65 Tue, 17 Jun 2008 22:38:48 +0000 http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-65 Thanks for sharing the template. I would like to know what do you mean by the following entry and how it is used to manage the trade Std Dev move to expiration Cheers -bob Thanks for sharing the template.
I would like to know what do you mean by the following entry and how it is used to manage the trade

Std Dev move to expiration

Cheers
-bob

]]> by: OptionsRopeaDope http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-56 Thu, 12 Jun 2008 19:07:21 +0000 http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-56 Thanks for the comment. Not sure what you mean by a price target, unless it is the profit target in the template. In general, I'm pretty conservative with calendars and try to only do ATM ones. The risk and expiration curve for calendars would not make them a good bet I would think (the negative gamma built in means I'd lose money faster if the underlying moved away, than I would make if the underlying moved toward the strike.) But I have heard some people mention them and I'd like to know how they use them and control the risk. Thanks for the comment.

Not sure what you mean by a price target, unless it is the profit target in the template. In general, I’m pretty conservative with calendars and try to only do ATM ones. The risk and expiration curve for calendars would not make them a good bet I would think (the negative gamma built in means I’d lose money faster if the underlying moved away, than I would make if the underlying moved toward the strike.)

But I have heard some people mention them and I’d like to know how they use them and control the risk.

]]> by: Bill http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-54 Mon, 09 Jun 2008 23:11:13 +0000 http://www.optionsropeadope.com/2008/06/09/a-template-for-calendar-trades/#comment-54 I like the template. Would you ever want to have a price target (for example, for a directional calendar)? I like the template. Would you ever want to have a price target (for example, for a directional calendar)?

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