SHORT CALENDAR SPREAD : target - 10 to 20% Return On Investment
- Thread starter linkon7
- Start date
Hi,
did you try this stratergy other way round, i mean buying far month option and selling closer month with closing the position near the closer month expiry and intitiate trade for ATM calls and puts both.
I'll explain with example :- nifty april series first monday let say nifty at 3000
selling april 3000 CE buying may 3000 PE
selling april 3000 PE buying may 3000 PE
or may be doing only one depending where you think nifty is heading and closing the position by april expiry ( i mean on that day or that week).
Looking for your suggestions.
Thanks,
Harmeet
did you try this stratergy other way round, i mean buying far month option and selling closer month with closing the position near the closer month expiry and intitiate trade for ATM calls and puts both.
I'll explain with example :- nifty april series first monday let say nifty at 3000
selling april 3000 CE buying may 3000 PE
selling april 3000 PE buying may 3000 PE
or may be doing only one depending where you think nifty is heading and closing the position by april expiry ( i mean on that day or that week).
Looking for your suggestions.
Thanks,
Harmeet
There is never a perfect way of playing a strategy. should i buy or sell the next month's ATM option and buy / sell the current months ATM, depends on the three scenario,
Scene 1 : market rallies further
next months ATM would gain more rapidly then current month's ATM, since time decay would be more effective on current month.
i can expect a better return here if i buy ATM of the next month and sell the ATM of current month....
scene 2 : markets falls
next months ATM would loose value very quickly as most bears / bulls would like to play covered puts or covered calls and effectively creating more selling pressure.
scene 3 : markets takes a breather stays plus minus 50 points around the ATM level.
next moths ATM would loose value far more rapidly than current months ATM again thanks to time decay.
under scene 2 & 3, selling ATM next month makes more sense.
but, the volume traded in the next month's options is very low and the ask / bid prices fluctuates too wildly. there are big gaps in prices and you wont be able to exit profitably unless luck plays a hand and Luck never supports a trader
Scene 1 : market rallies further
next months ATM would gain more rapidly then current month's ATM, since time decay would be more effective on current month.
i can expect a better return here if i buy ATM of the next month and sell the ATM of current month....
scene 2 : markets falls
next months ATM would loose value very quickly as most bears / bulls would like to play covered puts or covered calls and effectively creating more selling pressure.
scene 3 : markets takes a breather stays plus minus 50 points around the ATM level.
next moths ATM would loose value far more rapidly than current months ATM again thanks to time decay.
under scene 2 & 3, selling ATM next month makes more sense.
but, the volume traded in the next month's options is very low and the ask / bid prices fluctuates too wildly. there are big gaps in prices and you wont be able to exit profitably unless luck plays a hand and Luck never supports a trader
