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  • How to build calendars

    October 12, 2009 by  
    Filed under Double Calendars, Options

    Q: As I build my profit expiration tent i tend to like and use calendars. So thinking nov dec spy I saw that there is very small difference buying a 107 calendar call (sell nov buy dec)versus a 107 calendar put. Am i crazy? or is it ok say to do 107 105 103…etc all using call spreads? or should i use calls on the right side of the tent and puts on the left side?

    A: When building calendars it’s important to realize that the maximum profit of a calendar spread is achieved when prices reach the short option at expiration.

    So… if you are bullish then you would want to build your calendars with calls at gradually higher strikes 103, 105, 107 widening your tent to the upside potential, etc…

    If you are bearish you want to do the opposite- use put calendars at gradually lower strikes…
    103, 101, 100 etc…

    This way you profit from the anticipated moves and it’s also why I spend a great deal of time discussing the movement of the general market and use technical analysis as much as I do in the daily reviews.

    When I first created the course we were in a different type of market where volatility was relatively low (under 25).

    Now things are different and the combination of technical analysis with income trades like calendars is the best possible system for profiting from the market.

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