Short term
Trade view / 06 October 2016 at 8:37 GMT

UPDATE 2: Adjusting our SPY calendar spread

Product Manager Futures and Options / Saxo Bank
Denmark

With our 5 OCT 217 Call expiring out of the money, we are ready to roll this calendar spread further (read first update here). 

Sell 12 OCT 217 Call against our long 26 OCT 217 Call for $0.63 (last night's close).

The second adjustment and the credit of $0.63 reduces our cost basis down to just $0.17 (original cost basis at $1.30). 

In just two rolls we have managed to almost pay off entirely the net investment of $1.30. If we decided to close today, there would be a net gain of $1 (as of last night 26 OCT 217 calls are at $1.17). 

Markets will most likely continue to grind up and down which is what we want with this neutral strategy. Will provide another update Tuesday, October 11.

— Edited by Clemens Bomsdorf

Non-independent investment research disclaimer applies. Read more
06 October
AlexF AlexF
Hi Georgio to start the strategy I could execute the trade above as of today right ?
06 October
Georgio Stoev Georgio Stoev
yes, you would buy 26 Oct 217 Call and sell 12 Oct 217 Call
06 October
Feders Feders
Hello, the election of the long strike in 217, why did you pick 217?. Why didn't you pick example 216 for the long call, and 217 for the short call. Or from other point of view, is it possible that in some of future rolls we would be picking a strike above 217 for our short call?
Another doubt, we have wednesday and friday expirations for SPY options, is there any difference with one or another expiration day?
Thanks!
06 October
AlexF AlexF
Thnaks Giorgio
06 October
Georgio Stoev Georgio Stoev
Hi Feders, a 216/217 will be a diagonal spread, different expirations and different strike, we are sticking with a calendar same strike, for underlying to remain close.
06 October
AlexF AlexF
Hi Giorgio does it makes sense to start it now I will have only 3 roll left and the premium is at 1.5 USD....
06 October
Georgio Stoev Georgio Stoev
Our view on the market hasn't changed- sideways. If you believe that SPY will change little over the next 20 days, that's one way to position yourself. but these strategies are low probability, low risk, potential for high returns.

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