How to trade a Calendar Spread Description Graph Example Trade Finder Rules Pricing Trade Monitor Rules Conditional Orders. A Calendar works by Selling an Option on the Strike close to the current Market price with the current Expiration Date, and then buying the SAME STRIKE on the Next Expiration Date. Same underlying, same Strike, different Expiration dates. We can do Calendar trades option PUTs and CALLs.
A Calendar Spread is a DEBIT spread: The value of our Long position, the one with the further Expiration date, will always have more Time value than our Short Position which is the closer Expiration date. Therefore, the maximum amount of loss possible on a Calendar trade is the amount we pay for the trade.
Let's take our fictitious company AcmePlus as an example. This is what would happen if the Market price of AcmePlus was above strategy below the max loss point at the JUNE Expiration: We can see below on the graph of a Calendar trade where the max loss points are and where the break-even strategy are. The maximum profit on a Calendar Spread is at our Short Strike, which in our example is the Strike. We generally only hold Calendar trades for 14 to 21 days, and then we exit.
We don't ever hold a Calendar spread until Expiration option the option value and the Market price of our Long position can be grossly out of sync and we could end up with a large loss, plus we might have to do a lot of fast juggling in our Brokerage account dealing with a Short position that Expires In The Money.
When we trade Options, we don't have to go through the process of buying and selling the individual Options of our Calendar or other spread trades. We can make a "Spread" order, where we specify what Options we want to Buy and Sell, and we can say what NET amount we want to get. Using a Spread Order also protects us against any unfavorable changes in the underlying Market price.
We don't have to be diagonal a rush to try to fill part of our order with a Spread Order. With Spread Orders, we either get the pricing we want or we can walk away. There is no maintenance.
Our maximum loss is the amount we paid for the Calendar spread. We profit on a Calendar trade through the reduction of Time Premium during the 14 - 21 days that we are in the position. The Time Premium of our Short position, which is getting close to Expiration, will drop much faster than the Time Premium of our Long position, which has a more distant Expiration. It is possible to combine multiple Calendar strategy to widen the area of profitability.
It is also possible strategy remove and replace Calendars according to Market movements. Calendar Trades are generally placed at the Strike near the current price of the underlying, and held for 14 to 21 days.
The Uncle Bob's Money Trade Checklist and Trade Finder automatically check all the trading factors. Trade Finder screen shots. Any one of those items can cause the price of the Underlying to jump. If diagonal price of the underlying is too low, the price of the Options double be too low, and there won't be enough Time Premium decay to create a healthy profit. Never exceed the highest price limit.
The Uncle Bob's Money Trade Monitor automatically shows the profit level for each strategy and checks the relevant factors. Trade Monitor screen shots. Do not let a Calendar trade go until Expiration. Calendar Suggested Conditional Orders:. The Uncle Bob's Money Trade Monitor automatically shows the suggested break-even points, which are used for placing Conditional Orders.
It is possible to set one conditional order that has two separate trigger points, instead of 2 separate orders. Please see the Butterfly Conditional Order for an example of two trigger points. This is critical, because if double of the trades is filled, we don't want the other trade to stay live: As soon as one of our conditional orders is filled, the OCO setting will automatically cancel the other conditional order.
You can manually select the opposite spread to close the position if your Broker doesn't have the 'closing order' possibility. Market We don't want to set a limit price, because we don't know what the pricing will be and we want to close this position if the underlying diagonal our break-even point.
Make sure to use the Down-side break-even as listed in the Uncle Bob's Money Trade Monitor for your own trade. Wait until the following condition is satisfied: This order will show a WAIT COND status during waiting.
Submit the following order: The order is valid until it is either filled or cancelled. When the "MARK" of the Underlying is " AT OR ABOVE diagonal price of " ". We now have a conditional order that will close trading Calendar trade if the underlying price hits our break-even point, and when the closing trade is filled, it will automatically cancel the other conditional order.
If we decide double manually exit positions, we must first cancel ALL conditional orders that we placed on those positions. The Iron Condor is the easiest option strategy to understand and trade.
Here's all you need to know to trade one successfully. The Butterfly lets you maximize your returns under stable market conditions while risking only minimal loss. The Conservative Portfolio trades Super High Probability Iron Condors on the main Indexes RUT, SPX, NDX. June 18, Income-generating Options Trades Help. Home My Account Trade Finder Trade Log Trade Monitor Free Learning About Us. Option Generating Strategies Understanding Options Articles.
How to trade a Calendar by Trading Bob Williams. How to trade a Calendar Spread Description Graph Example Trade Finder Rules Pricing Trade Monitor Rules Conditional Orders - - - - - Video: How to trade a Calendar Spread - - - - - Calendar Strategy Description: A Calendar is the street name for a Horizontal or Time Spread. We pay to enter the trade. HOW WE CAN HAVE A LOSS: Trade Finder screen shots TIME FACTORS: Channeling for at least 45 days.
Example for a Conditional order to close a Calendar trade. We have a Calendar on Acme: STEP A Select "Advanced Trade": OCO One Cancels the Other This is critical, because if one of the trades is filled, we don't want the other trade to stay live: STEP Trading Down-side break-even: Your broker will describe this trade as: This order will show a WAIT COND status during waiting; 2.
The order is valid until it is either filled or cancelled; STEP C Up-side break-even: When the "MARK" of the Underlying is " AT OR ABOVE " price of " " Your broker will describe this trade as: The order is valid until it is either filled or cancelled; Double D Confirm that the trade was entered correctly, and submit the trade.
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