Nifty calender spread with calls or puts

[Somatung]

HMM just tested calendar spreads for 2012 and profit is close to zero.
After being very hopeful; I am dumping this strategy.

Well, as you not even explained in details how you tested your little calendar spread, you should not come up with your little comment. HOPE YOU CLEARLY GOT THE POINT. Improve your testing before you even come up with such comments. Take care and learn before posting. Take care

 

[sabharwal_RK]

Well, as you not even explained in details how you tested your little calendar spread, you should not come up with your little comment. HOPE YOU CLEARLY GOT THE POINT. Improve your testing before you even come up with such comments. Take care and learn before posting. Take care

Everyone is free to test their strategies; I am finding calendar spreads not useful to my temperament and liking, it may not be the same for other person.

So all please dont take my comment personally, go ahead and implement any strategy, it will yield different results from person to person.

 

[gmt900]

As I mentioned in my first post, I am trying to learn calendar spreads. So, I will not be able to answer your questions precisely.
However, what I gather so far is:
1. These strategies can be used to generate income without taking unlimited
risk.

2. I still have to figure out whether margin requirement will be less than that for Iron Condor.

3. From Sabharwal Saheb's excel sheet, it is clear that max loss will not exceed initial debit, something like buying a naked option.

4. Like any other strategy, one will have to figure out how to handle the trade
by experience.

5. Rather than fixed stop loss, one can decide to close trade with pre decided
profit or loss. I entered into a paper trade on 28 JULY as follows;

sell Aug 8000CE @ 35.90
buy Sep 8000PE @ 45.50
sell Aug 7500PE @ 38.00
buy Sep 7500PE @ 65.50

On 28 Aug, Max Profit ; 5011
Max loss : 1855
Return on 1 Aug was 1290.
Assuming margin req of 50,000 (it should be less), profit is 2.5 %. So, one might decide to take the profit and move on to the next trade.

Let us exchange any more ideas the members may have on the strategy.

Thanks and regards

Profit of this paper trade is 3025. I would have closed the trade if I were trading it live.

I feel , like any other strategy, calendar spreads are likely to succeed if entered when proper set up is available. One has to use OptionOracle to evaluate R/R ratio.

I have entered following trade:

Sell SEP 7800P @76
Sell SEP 7800C @209
Buy OCT 7800P @ 109.5
Buy OCT 7800C @ 277.

Max Profit 8190
Max loss 5075.

Current profit ; 110

 

[sabharwal_RK]

Few of my learning

1. Next month option has high Vega so avoid buying it when IVs are high.
2. Avoid calendar spreads in months following a sharp down move
3. Avoid Jan month calendar spread

 

[hardik229]

How to find the next months Vega or IV. How to decide the next month's IV is high?
Is there any specific reason to avoid the Jan Month?

Thanks..!!
Hardik

 

[gmt900]

Profit of this paper trade is 3025. I would have closed the trade if I were trading it live.

I feel , like any other strategy, calendar spreads are likely to succeed if entered when proper set up is available. One has to use OptionOracle to evaluate R/R ratio.

I have entered following trade:

Sell SEP 7800P @76
Sell SEP 7800C @209
Buy OCT 7800P @ 109.5
Buy OCT 7800C @ 277.

Max Profit 8190
Max loss 5075.

Current profit ; 110

Since nifty is in a bullish mode, closed put legs;

Bought SEP 7800P @ 56
Sold OCT 7800P @ 91
No profit, no loss.

Now it is plain calendar spread.

 

[hardik229]

Few of my learning

1. Next month option has high Vega so avoid buying it when IVs are high.
2. Avoid calendar spreads in months following a sharp down move
3. Avoid Jan month calendar spread

How to find the next months Vega or IV. How to decide the next month's IV is high?
Is there any specific reason to avoid the Jan Month?

Thanks..!!
Hardik

 

[gmt900]

Since nifty is in a bullish mode, closed put legs;

Bought SEP 7800P @ 56
Sold OCT 7800P @ 91
No profit, no loss.

Now it is plain calendar spread.

current position of call calendar spread is :

SEP 7800CE sold @209 , current price 353.85
OCT 7800CE bought @ 277, current price 415.

since nifty is in bullish mode, I will buy back SEP 7800CE towards the end of the SEP series and let OCT 7800CE ride.

 

[gmt900]

As I mentioned in my first post, I am trying to learn calendar spreads. So, I will not be able to answer your questions precisely.
However, what I gather so far is:
1. These strategies can be used to generate income without taking unlimited
risk.

2. I still have to figure out whether margin requirement will be less than that for Iron Condor.

3. From Sabharwal Saheb's excel sheet, it is clear that max loss will not exceed initial debit, something like buying a naked option.

4. Like any other strategy, one will have to figure out how to handle the trade
by experience.

5. Rather than fixed stop loss, one can decide to close trade with pre decided
profit or loss. I entered into a paper trade on 28 JULY as follows;

sell Aug 8000CE @ 35.90
buy Sep 8000PE @ 45.50
sell Aug 7500PE @ 38.00
buy Sep 7500PE @ 65.50

On 28 Aug, Max Profit ; 5011
Max loss : 1855
Return on 1 Aug was 1290.
Assuming margin req of 50,000 (it should be less), profit is 2.5 %. So, one might decide to take the profit and move on to the next trade.

Let us exchange any more ideas the members may have on the strategy.

Thanks and regards

Update on the paper (unfortunately) trade entered on 28 July.

Due to the spectacular run by nifty, SEP 8000CE bought at 45.5 is trading at
212.65.

Profit is 8895.

When I entered this trade, max profit/loss by 28 AUG would have been
5011/1855.

This shows that with low margin requirement and limited loss risk, calendar
spread can give spectacular returns.

I think the difference between the frontend and the backend month prices
is very important for a good R/R ratio.

 

[gmt900]

current position of call calendar spread is :

SEP 7800CE sold @209 , current price 353.85
OCT 7800CE bought @ 277, current price 415.

since nifty is in bullish mode, I will buy back SEP 7800CE towards the end of the SEP series and let OCT 7800CE ride.

Current notional loss is 385. This trade should give a decent profit by SEP expiry.