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I've never traded calendars but I think I follow what you've got going. So you decided to add the 25 put calendar after earnings even though IV had collapsed because the stock moved further down than you thought it would? and the result is that you've widened out your break-even points in exchange for lower potential reward? It looks like a good trade because earnings are out and there wasn't an adverse movements either direction. So if it just stays flat you make theta, IV shouldn't go anywhere at this point. Please update this trade through expiration or exit for me, thanks.
So I'm assuming this is the type of trade you would make repetitively around earnings and every now and then you get burned a bit with a larger than theorized move, but a large percentage of the time you are on board for a quick IV collapse and can exit immediately for a small gain?
I basically agree with everything you have said in the first paragraph. I would just say that IV as it relates to the earnings is out of the picture, but general market IV is still an issue. If VIX were to increase that will usually be beneficial for a calendar position, which is why I like to own calendars when IV is low.
I basically agree with your second paragraph as well, but would also add that while you can often exit quickly for a small gain, if you have chosen your short strikes well you can stay in the trade for a longer time and have a big gain - see the QCOM trade I am managing for my friend for a good example of this.
I am really ticked off about the way this trade is going. Yesterday I sell the 27 call calendar for a 6 cent loss because I think the market looks weak. Today the market is very week, yet when the /ES is down 11 points MSFT is up 40 cents or so. If I had sold the 27 call today I could have gotten 3 cents profit on it instead of the loss I took. I'm hoping to be able to hold my current position for another week or so, but if it continues to behave in ways that I don't understand I may have to dump the position.
I sold the 25 calendar today for 26 cents - a 2 cent profit. The trade removes some risk and leaves me with just the 26 Put calendar remaining. The plan is to hold this last calendar as long as possible, but right now this last calendar represents all the profit in the trade so the goal will be to make sure that when this is sold the overall trade is profitable.
Did a lousy job of managing this trade. Said above that my goal was to preserve my profit in my remaining 26 Put calendar. Didn't do that and let it turn into an 8 cent loss. So basically on this entire MSFT trade I had a 12 cent loss. Probably a mistake to trade such a small position, since it wasn't a lot of money I didn't give it as much attention as I should have and let the profit turn in to a loss when I got distracted by events going on in other positions I'm managing that have a lot more impact on my account.
This is why I don't paper trade. Besides not paying the same amount of attention as if it's real money, you don't get the same fear factor/risk management when it's not real. It's always tricky, but when I test out new things I try and find the dollar amount to use that will keep me interested, but not hurt me if it goes awry.
Trade Update:
ReplyDeletehttp://screencast.com/t/DgoFNwIp5MW7
I've never traded calendars but I think I follow what you've got going. So you decided to add the 25 put calendar after earnings even though IV had collapsed because the stock moved further down than you thought it would? and the result is that you've widened out your break-even points in exchange for lower potential reward? It looks like a good trade because earnings are out and there wasn't an adverse movements either direction. So if it just stays flat you make theta, IV shouldn't go anywhere at this point. Please update this trade through expiration or exit for me, thanks.
ReplyDeleteSo I'm assuming this is the type of trade you would make repetitively around earnings and every now and then you get burned a bit with a larger than theorized move, but a large percentage of the time you are on board for a quick IV collapse and can exit immediately for a small gain?
I basically agree with everything you have said in the first paragraph. I would just say that IV as it relates to the earnings is out of the picture, but general market IV is still an issue. If VIX were to increase that will usually be beneficial for a calendar position, which is why I like to own calendars when IV is low.
ReplyDeleteI basically agree with your second paragraph as well, but would also add that while you can often exit quickly for a small gain, if you have chosen your short strikes well you can stay in the trade for a longer time and have a big gain - see the QCOM trade I am managing for my friend for a good example of this.
Trade Update:
ReplyDeletehttp://screencast.com/t/iDEFEcykH0
So if you held until expiration and it finished between 25-26 you're still looking at about a $240 profit?
ReplyDeleteYes.
ReplyDeleteI am really ticked off about the way this trade is going. Yesterday I sell the 27 call calendar for a 6 cent loss because I think the market looks weak. Today the market is very week, yet when the /ES is down 11 points MSFT is up 40 cents or so. If I had sold the 27 call today I could have gotten 3 cents profit on it instead of the loss I took. I'm hoping to be able to hold my current position for another week or so, but if it continues to behave in ways that I don't understand I may have to dump the position.
ReplyDeleteI sold the 25 calendar today for 26 cents - a 2 cent profit. The trade removes some risk and leaves me with just the 26 Put calendar remaining. The plan is to hold this last calendar as long as possible, but right now this last calendar represents all the profit in the trade so the goal will be to make sure that when this is sold the overall trade is profitable.
ReplyDeleteDid a lousy job of managing this trade. Said above that my goal was to preserve my profit in my remaining 26 Put calendar. Didn't do that and let it turn into an 8 cent loss. So basically on this entire MSFT trade I had a 12 cent loss. Probably a mistake to trade such a small position, since it wasn't a lot of money I didn't give it as much attention as I should have and let the profit turn in to a loss when I got distracted by events going on in other positions I'm managing that have a lot more impact on my account.
ReplyDeleteThis is why I don't paper trade. Besides not paying the same amount of attention as if it's real money, you don't get the same fear factor/risk management when it's not real. It's always tricky, but when I test out new things I try and find the dollar amount to use that will keep me interested, but not hurt me if it goes awry.
ReplyDelete