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...
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…
Last week the market continued lower despite being deeply oversold, putting one of our Calendar Options positions in adjustment territory for the second time. It’s been a wild ride for EEM: After a decline of more than $3 Wednesday, the ETF dropped another $1.50 in early trade Thursday morning, to a low of $127.92, then rallied back above $130 before retreating again with the rest of the market.
IYR fared better last week. Even though the real-estate ETF fell along…
We talk a lot about why adjusting iron condors is rarely, if ever, a good idea, and adjustment decidedly is not a part of the Condor Options strategy. So you’re probably wondering, why all these Calendar Options posts about adjustments? The answer is simple—calendar spreads are not like iron condors.
A quick review: As we explained in Part I of this series, our decision to adjust calendar spreads is based on the same criteria as our decision not to…
With markets sharply down this morning, we want to extend the profit range of our EEM July/Sept calendar put spread to the down side by rolling half of our position at 140 to a put calendar spread at 130, as follows:
-2 EEM Sept 140 put
+2 EEM July 140 put
for a net credit of $3.80;
+2 EEM Sept 130 put
-2 IBM July 130 put
for a net debit of $4.40.
Again, the two-contract…
The first month of Calendar Options trading was characterized by the high day-to-day price volatility typical of market transitions. As the late-March to mid-May bear-market rally came to an end, we were buffeted in the buying climax and the sharp selling that followed—but we still came out with an average profit of 6.59%, handily beating the market. (If you’re wondering how we come up with our dollar return and percent return figures, see Calendar Options: How We Calculate Returns.)…
It’s Monthly Review time, and we’ll be posting a review of our June Calendar Options trades shortly. But some readers have been having trouble making the returns posted in our Close Trade Alerts add up—and it’s no wonder, because the answer isn’t exactly obvious. How could we open a trade for a net debit of $1.55 and close it for a net credit of $5.75, and come up with a profit of only 7.28%? It’s not hard to understand once…
Our EEM June/Sept double-calendar position has hit our target profit of 15%, and we’re closing the position, as follows:
Day limit order
Sell to close 2 EEM Sept 150 calls
Sell to close 2 EEM Sept 140 puts
Buy to close 2 EEM June 150 calls
Buy to close 2 EEM June 140 puts
for a net credit of $13.65 or better.
Note that 2 contracts per leg represents our entire position. Also note that…
RTH rallied to $96.83 this morning before pulling back below $96.50. The rally has stalled for now, but there’s a good bit of support around $96. To facilitate closing this trade we’re lowering our price on any orders that did not get filled at $1.75:
Day limit order
Sell to close 4 RTH July 95 puts
Buy to close 4 RTH June 95 puts
for a net credit of $1.65.
Analysis: We’re closing this position now to…
We’re entering an order to close our adjusted RTH calendar-spread position, as follows:
Day limit order
Sell to close 4 RTH July 95 puts
Buy to close 4 RTH June 95 puts
for a net credit of $1.75 or better.
Note that 4 contracts represents our entire position.
Analysis: We’re closing the position now to reduce our gamma risk as we move into expiration week. We think we have a reasonable chance of getting filled at $1.75,…
Saturday, July 4, 2009
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