Calendar spreads
- Thread starter Marcas
- Start date
i'm back with another disappointing calendar trade. this is another surf paper trade, started on may 8, using a may22/may26 expiration. i've been in this for 12 days, for those who can't do the math, and it essentially hasn't been very profitable the whole time. it was up 5% yesterday with 700 dollars of theta. i figured it would be up close to 10% today: wrong. so what happened? i'll show you what happened and why calendars are so difficult to trade. the first image is referred to as an iv term structure. it plots the at-the-money spx iv for several expiration days. this was sampled today but it's looked similarly for several days. you can see the curve is in backwardation, meaning, the front expiration iv is higher than the further out days. most times this is a good thing for establishing a calendar, but if you're already in a calendar it's a death threat. there's 2 days remaining and if nvda doesn't crater or rocket the market tonight, should get more profitable.
Update on what I said before re using TOS for calendars study.
I don't use TOS myself, I relay on my apps to study trades or to verify statements made by others. Lately I spend much time on time spreads and today I fancied to check myself with TOS.
I believe I said TOS is an app that can be used for time spread studies bc it has abilities to manipulate IV of individual legs. My assumption was that those TOS' IV manipulations work similar to what I do. I was wrong.
IV changes made in TOS affect only t+0 line and, nothing else, not the price, not the whole risk graph. This makes study harder, not impossible but much harder and TOS' graph outputs might cause confusion.
Likely those who uses TOS for those purposes is already know about the issue, and for one who doesn't the thing has no weight. I just was not aware of that before.
Pic: Individual leg IV adjustment feature in TOS.
I don't use TOS myself, I relay on my apps to study trades or to verify statements made by others. Lately I spend much time on time spreads and today I fancied to check myself with TOS.
I believe I said TOS is an app that can be used for time spread studies bc it has abilities to manipulate IV of individual legs. My assumption was that those TOS' IV manipulations work similar to what I do. I was wrong.
IV changes made in TOS affect only t+0 line and, nothing else, not the price, not the whole risk graph. This makes study harder, not impossible but much harder and TOS' graph outputs might cause confusion.
Likely those who uses TOS for those purposes is already know about the issue, and for one who doesn't the thing has no weight. I just was not aware of that before.
Pic: Individual leg IV adjustment feature in TOS.
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