Calendar Spread

[Mikey12345]

Hi im new to option trading and are interested in Calendar Spreads. Has anyone got a simple spreadsheet that can calculate breakeven point on Calendars.

Apreciate you kindness.

Thanks

 

[luckyd1976]

Nope but most broker platforms have tools that will show breakevens
A Trade Calculator of some kind.

Your posts seem to be heavy Spreadsheets. Are just working on a particular project?

 

[luckyd1976]

Let's breakdown the calendar spread today.


B-LT call option
S-ST call option
Price
S-ST put option
B-LT put option

All for a net debit.

The trick on calendar spreads are the LT needs to be LEAPS or 1yr out and the ST needs to have high IV/and Higher deltas. Plan on writing multiple months of the ST to make this a worthwhile strategy

 

[GTS]

...Or you can pull in the duration of the LT and spend much less of a net debit. The larger the debit the more vega risk.

 

[hokid]

Hi, I am new in options too. What is Vega?

 

[LeveredHedge]

Vega is the sensitivity of the option value to changes in implied volatility.

The vega of a long term option is going to be larger than the vega of a short term option as intuitively a long term option is going to be more sensitive to changes in implied vol while a short term option is going to be more sensitive to realized vol (higher gamma for shorter dated options).

Although keep in mind that implied volatility is generally more volatile on the short end of the curve, and a lot of sell side options desks use vega/Sqr(T) to get what is called a root vega, which adjusts for this higher vol of imp. vol.

 

[Martinghoul]

There's all sorts of tasty complexities to doing calendar spreads, exposure to fwd vol being just one of them.

 

[scose-no-doubt]

all sorts of tasty complexities

Sadist

 

[Martinghoul]

Sadist

Masochist, you mean?

 

[woolldog]

Hi everyone, new poster here.

This may seem like a naive question, but just wondering whether there's a way to hedge your gamma on a calendar spread so as to isolate vega?

 

[option911]

Hi everyone, new poster here.

This may seem like a naive question, but just wondering whether there's a way to hedge your gamma on a calendar spread so as to isolate vega?

Generally no,

however there are ways to mute it, things like weighting your vega can help with that, although that subject can be a little dense

 

[woolldog]

Generally no,

however there are ways to mute it, things like weighting your vega can help with that, although that subject can be a little dense

option911, thank you! Please explain...even if its dense

 

[option911]

This is a piece I wrote for SFO, if you have futher questions feel free to message me via T2W

http://www.sfomag.com/ArticlePrint.aspx?ID=1465

 

[dmeista]

just buy/sell a vix-future on cboe.

 

[option911]

that won't solve the gamma issue

 

[dmeista]

i guessed he just wanted to do a vega trade and was not asking particular about the calendar.

If he's really talking about calendars only...not possible by definition imho.