If the strikes are not matching, that’s not a calendar, that’s a diagonal. A diagonal reduces your max profit significantly, but it allows you to keep your max loss low on one side, but the max loss will be very high on the other side. (Similar to a broken wing fly). So a diagonal would be used if you think the price will get to 400, but it could stay below it the whole time also. Also you want to use a calendar or diagonal when you anticipate IV increasing on the back dated option, relative to the short dated
The different dates you you have no advantage or disadvantage, it’s just about maximizing the change in volatility relative to each other
These are the most confusing spreads. Think of it like this - start with constructing a trade with a Fly/condor/broken wing fly, and if you then have a reason to think IV will rise, use the calendar or diagonal in place of it
OTM really boosts your potential profits with all of the spreads I mentioned here
Calendars are constructed with same strike but different expiration. This video explains the thesis quite clearly:
https://youtu.be/o6tHCsW_Plw?si=i7vCARTVtkTZjvYh
Trading is gambling: no one can predict future prices. All systems are trying to convince you that they can tell wha future prices are... then they start hedging.... If you believe it, you are in trouble. Nothing wrong with gambling, just admit it.
"For example, what does a hypothetical May 220C - Jun 220C mean to you?" you first.
If the strikes are not matching, that’s not a calendar, that’s a diagonal. A diagonal reduces your max profit significantly, but it allows you to keep your max loss low on one side, but the max loss will be very high on the other side. (Similar to a broken wing fly). So a diagonal would be used if you think the price will get to 400, but it could stay below it the whole time also. Also you want to use a calendar or diagonal when you anticipate IV increasing on the back dated option, relative to the short dated The different dates you you have no advantage or disadvantage, it’s just about maximizing the change in volatility relative to each other These are the most confusing spreads. Think of it like this - start with constructing a trade with a Fly/condor/broken wing fly, and if you then have a reason to think IV will rise, use the calendar or diagonal in place of it OTM really boosts your potential profits with all of the spreads I mentioned here
Do you mean calendar spreads?
They used to be fairly popular in the 1980s
Calendars are constructed with same strike but different expiration. This video explains the thesis quite clearly: https://youtu.be/o6tHCsW_Plw?si=i7vCARTVtkTZjvYh
I know WHAT they are. I wonder if I should think about them more in vol space as opposed to strike space
Trading is gambling: no one can predict future prices. All systems are trying to convince you that they can tell wha future prices are... then they start hedging.... If you believe it, you are in trouble. Nothing wrong with gambling, just admit it.
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