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Optimal Calendar Spread Trading - Sep 4, 2018 | Market Measures
Frank, Pete, and Tony discuss how to trade and when to trade calendar spreads. Tune into the study for all of the takeaways!
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      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      Market Measures

      Optimal Calendar Spread Trading

      Sep 4, 2018

      The calendar spread is a low Implied Volatility strategy that entails selling a short-term option while buying an option of the same type further out in time. So when is the optimal time to trade these?

      Study:

      • Compared trading Calendar Spreads to only trading when IV
      • Rank was below 25% and varied management targets
      • Bought 60-DTE, 40 delta put and sold 30-DTE, same strike put
      • 2005 to Present
      • Russell 2000 Index (RUT)

      Though the profits weren’t off the charts for this large underlying, calendars have been consistent winners if we managed profits at 10% of capital used.

      Additionally, when implied volatility was near the bottom of its range, profits increased in put calendar spreads.

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