Master Calendar Spreads with this live trade on Gold (GLD)

Master Calendar Spreads with this live trade on Gold (GLD)

MASTER CALENDAR SPREADS

Calendars Spreads are popular trades and come under the category of Time spreads. In a Calendar spread, we sell the front month Option series and buy the back month Option. The Calendar is generally constructed at the money, however, you can create bullish or bearish variations. It starts out as a delta neutral but can quickly move into a biased position. The Calendar is also one of the few strategies that is a Theta positive and a Vega positive trade. Because it is Vega positive, your Calendar will do better if Volatility increases after you put the trade on. The primary method of profit in Calendar Spread Strategy is to take advantage of a higher level of time decay in the front month. We put a Calendar trade on the GLD, and this quickly turns into a Double Calendar when price moves too much in one direction. In fact, this trade is an absolute roller-coaster and you will learn a very valuable lesson - Don't give up on your losers. If you simply close your losers and move on to the next trade, you will make the same mistakes and lose again. Fight your losers and turn them back into a break-even and you would have never felt better with a trade.

What you can expect

• Why is the Calendar spread trade a unique trade in the Options playbook
• How do we conceptualize Options from two different expiry series
• What does Vega positive and Theta positive mean
• What danger points should we watch for in Calendars
• What are the popular adjustments for Calendars
• Why can a Calendar sometimes become a directional position
• Why are time spreads a little hard to adjust
• What is the first and simplest adjustment to a Calendar Spread Strategy
• What are the advantages of a double calendar
• How should we deal with a trade in serious trouble
• Why are exact profit and loss calculations difficult to calculate

Calendar spreads (aka "Time Spreads" or "Horizontal Spreads") are an effective Time decay and non-directional strategy.

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What you will learn

• Master the art of putting on Calendar spreads
• Learn why Calendar spreads are unique with its Greeks
• When does the Calendar spread get into trouble

Rating: 4.6

Level: Expert Level

Duration: 1 hour

Instructor: Hari Swaminathan