As I am not too happy with the results, I have not deployed any Iron Condor lately. Nor I have had the chance of deploying a Put Spread, which is a trade that I am much happier with.
In the meantime I have been reading about Calendar Spreads and done a bit of paper trading with them. Today I would like to share my thoughts on them.
Note: This is not meant to be a proper study on Calendar Spreads, just some notes I have compiled on the way. Any serious study on a trading strategy requires a proper set of back tests.
Example Trade Setup: Positions opened, days until expiration (DTE) and debit invested
The calendar spread is composed of two positions (in this example PUT options for the German DAX30 - ODAX):As the option in the future has more time value, this results in an overall debit.
- Same strike price: 12500 points in this case.
- Different lifespan: A shorter one, using the front month (32 days) and longer in the other, some three or four months in the future (158 days).
- Short/long: You sell the front option and buy the option in the future.
For instance, this is the current status of a "paper trade" that I have simulated for a couple of weeks:
Results in this profit/loss graph:
The orange line is the profit/loss at the expiration date of the short option, while the blue line is displaying the profit/loss 9 days after opening the trade. Note that the amounts are all multiplied by 5 here as each ODAX option represents 5 contracts (or 5€ per point).