Our positions for the June cycle were like Dr. Jekyll and Mr. Hyde. In general, it was another difficult month, in terms of falling implied volatility and, in the case of our IBM trade, an uptrend culminating in a whipsaw—but we still managed to break even: hitting the target profit for our SPY position made up for our IBM loss. And even though we underperformed the market for the month, we’re still outperforming handily over the long-run.
Thursday, May 28, 2009
We’re a bit behind on Calendar Options reviews, so we’re making this one a double-header— quite apropos, as it turns out, because the story is much the same for April and May: A strong market uptrend and steadily falling implied volatility continued to work against us, but we still came through each cycle with a profit. That makes three straight months in which we’ve shown that a market-neutral income strategy using calendar spreads can work in trending markets, even when…
Friday, April 24, 2009
Traders with a background in stocks, futures, or forex are sometimes thrown off balance when they begin learning about options: one of the biggest hurdles is learning the various types of spreads, the risk characteristics of those spreads (i.e., the greeks), and how to think in terms of time, volatility, and price, instead of thinking in terms of price only. One frequent misconception is that different spread types are strategies in and of themselves. A reader sent in a comment…
Wednesday, March 11, 2009
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Last month we made important changes to the Calendar Options service—changes aimed at reducing the odds of taking a loss like we did in January. The most significant change was to expand the scope of the newsletter, at least temporarily, to include double-diagonals, so that we’d have more opportunities to enter trades even when implied volatility is on the high side. (For readers unfamiliar with this exotic-sounding strategy, we’ve just made an excerpt from a Calendar Options post introducing the…
Tuesday, November 11, 2008
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We often refer to the complementary nature of iron condors and calendar spreads, in that the former benefit from falling implied volatility, while the latter generally get a boost from rising IV. So does that mean you should balance out volatility risk by allocating as much capital to calendars each month as you do to iron condors? Unfortunately, it isn’t that simple. First, it’s important to think about where implied volatility might be headed, especially when it’s at one extreme…
Saturday, July 4, 2009
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