T+0 line on calendars on TOS

status1

Active member
I was wondering if there is any way to have a somewhat more accurate T+0 line for calendars
Often the T+0 line for calendars on the TOS analyze tab is way off in after hours I understand that this is due to the implied volatility not having accurate prices I was just wondering how others are dealing with this issue

I have one double calendar that was eaven yesterday at EOD and now before the opening it's all messed up The upper one is all draged down with the T+0 line way above the expiration line above both calendars I am not sure how can anyone make any plans on what to do with this kind of trade unless you wait for the market to open before making a decision

I tried playing with the settings and they all look better than the IIV setting as far as the T+0 line is concerned but the P/L is much higher than reality so you are not going to get filled nowhere near where it shows the profit line to be

Another thing is the Vega and Theta that is shown on the Price slice seem to be meaningless
The Theta was showing arond +400 while the Vega was around +500 so you would think that with all else being equal you would gain about $400 per day
and that's what you see when you advance the days but in reality you get maybe a fraction of that

The same thing with Vega you would think that with the Vol going up because of the price drop you would get a gain but in reality I got a P/L drop from the day before

I don't know if this is because of some weird market conditions but from what I have noticed in reality the calendars do not behave anywhere near to where the T+0 line is showing When you advance the days to near expiration and you see the T+0 line showing a nice profit you can forget about that and you will be lucky if you get a fraction of that if not a loss if you are not close to the center of the tent
 

jim leahy

Member
what i do is use a different option analysis program. but, i believe this is caused by wide and distorted
bid/ask spreads on the close. if you model the calendar as separate long and short strikes you can change
the prices to reflect those prices a few minutes before the close. you can also adjust the iv of the strikes.

also, in a different forum someone mentioned that tos greeks are not accurate for calendars. i don't know why
this is the case, but i have observed it myself.
 

status1

Active member
what i do is use a different option analysis program.
Is this a program that you made ?

also, in a different forum someone mentioned that tos greeks are not accurate for calendars
I don't mind if it's not exactly accurate but this is off the chart inaccurate

What about the daily p/l for the double calendar ?
Is there an explanation for that ?
I mean if the underlying is under the tent near the middle you would expect the T+0 line to move up daily everything else being equal but that doesn't seem to be happening lately It's more like the T+0 line stays about the same and the expiration line is coming down

I have a double calendar on now that had a small profit on Friday and yesterday it was just 4 cents lower after 3 trading days and that's with Theta around 400 and Vega around 500 In the meantime SPX went up and down and ended up 42 points higher which is closer to the center for my trade and Vix went down and up and ended down 1.74 from Friday to the close yesterday

I have traded callendars and diagonals when the Vix was much higher and had much better success with positive daily increases
Even then the projected p/l was higher than reality but at least it had some positive movement compared to now when the p/l went nowhere in 3 days

It seems like it's better to trade calendars when the Vix is high which is opposite to the conventional wisdom at least that is my observation but I never traded calendars before this year so I guess it could be just because of the circumstances of the market this year
 

Marcas

Active member
I don't have much time to elaborate but I noticed mistake in your post that is repeated by many traders, including gurus. What you refer as 'expiration line' in calendar is not an expiration line at all. That line is t-line at expiration of short leg. Up to this point location of t line was guided by two expirations from now it will be only one expiration where second provide constant number to equation. Stop thinking about it as 'expiration line' and situation will become more clear. Jim's method of looking at cal as separate legs is very good one - you can see and understand more things this way.
 

status1

Active member
I can look at the short leg but that doesn't tell me anything about where the p/l for the day should be
I understand that the expiration line is not fixed on calendars and I don't expect to get to the expiration line as I enter the trade
I would expect to make some kind of positve daily p/l if the underlying is in the middle of the tent
At this point I could stay in the middle of the tent and make only a small fraction with everything else being the same

From what I imagine Jim has his own program so he can change the iv of each leg which is not something that can be done in TOS
But even then just because I can change the iv and shows a better p/l that doesn't mean that I will get filled at those prices
From what I understand the Iv of each leg determines the bid/ask prices of each leg which in turn determines the T+0 line so if the iv is off on one of the legs the entire T+0 line is off and that is why sometimes when the market is not trading I see the T+0 line that is way off
Just a few minutes ago I was looking at my trade during trading hours and I noticed the T+0 line that was way off so I looked at the prices and I found that the 3000 strike had 0 bid so that is what was throwing everything off It got fixed a few seconds later
I understand that part and there is nothing I can do in TOS to fix that unless I make my own program

I am more concerned about the very small if any daily p/l in the calendars
It's almost not even worth doing calendars at this time
 

jim leahy

Member
yes, i have my own analysis software and i can modify the iv of each leg separately, but you can do this in thinkorswim
as well. if you click on the settings gear on the risk profile tab, it will display a form to change the vol and price.
there's also another option for "more parameters". if you click this, it will display a form to change the vol for the separate legs.

properly modeling calendars and diagonals is an art, rather than science. this is due to a controversial
concept called weighted vega. i argued this in the options mechanics trading group forum and there is
another discussion somewhere else in these forums. i believe the issue you're seeing with the t0 line is
because the volatility of the different legs changes at different rates. i do mostly diagonals, and mostly
for earnings. on earnings trades you have a pretty good idea what's going to happen with the volatility of
both legs. with other longer term trades, it's just a swag. you know the volatility of the front month will change
more than the back month, but how much it difficult to determine. with experience, you'll get better at it. but
it's imperative you model them independently.
 

status1

Active member
Thanks for pointing out the "more parameters" but I don't think that will change anything that just changes the percentage of the volatility for that expiration It does not change the Implied Volatility of each leg so just because that volatility for that expiration is a little higher it doesn't mean that each strike will be raised by the same amount

Even if I could change the IV that would make the T+0 line look better that doesn't mean the I will get filled at those prices
 

jim leahy

Member
Even if I could change the IV that would make the T+0 line look better that doesn't mean the I will get filled at those prices

correct. during market hours the iv shown is the "correct" iv for that price (despite the fact that every broker
platform has a different iv). what changing the iv in the model allows you to do is "what if" analysis. for
example what if the price rises, the iv will generally fall and you can model the change in iv for the separate
legs to see how the t0 line will look in he future.

if you model the calendar as separate strikes you will see both on the "more parameters" form.

vol_adjust.png
 

status1

Active member
Yes I can adjust the Vol percent but I have no idea how that corelates to the Individual Implied volatility of the particular price strike because they are all different so raising the vol by 1 percent let's say raises all of them across the entire expiration by that amount but in reality some could be higher while other could be lower

I played around with the "more parameters " feature yesterday and I raised the closer one by 3.3% and the further one out by 2.9% to raise the expiration line of one side to sort of eyeball it to where it was during the trading hours while keeping the p/l the same
Yes I can also do a what if but that is no use because the market is not going to behave that way
Whatever set's the Individual Implied Volatility that is what will determine the price of the strike which in turn will determinr the p/l

I had a nice pop yesterday in the p/l probably because the bounce in SPX even though the Vix and the underlying did not move that much compared to where it was the day before
 

status1

Active member
I just looked at my calendar this morning and it's messed up again
Looking at the IV on the trade tab I see that the 3300 strike does not have anything listed it just shows "--"
So there is no fixing that with changing the vol percent
I just have to wait for the market to open then see some IV to get the real prices
 

status1

Active member
I found a workaround for fixing the expiration line on my double calendar
I kept the price locked but I just changed the 3300 strike from puts to calls and that lifted the expiration line up to be closer to where it was originally I know the expiration line is not fixed I just don't like to see it down near the 0 line while the other one is still up
Apparently the IIV for the ITM puts trail off around 3300 to where it shows nothing so by switching to the call side it has more accurate IIV so it makes the expiration line look more normal
 

JeffP

New member
I trade DIA and CAL only and use TOS. VEGA is pretty much meaningless, maybe roughly 2-5% of the value stated. Also, Theta is roughly 1/3 of the value and sometimes it gives you a lot or or maybe won't move much in a day.

Overnight, the graph sometime goes wacky. I just don't pay attention to it or if it's important, I'll screenshot it right before the close.

I went down the rabbit hole with Weighted Vega and modeling, but over time, experience trumps any modeling for CAL and DIA. I hardly use any modeling for placing or adjusting my trades now and do very well.
 

status1

Active member
Theta is roughly 1/3 of the value and sometimes it gives you a lot or or maybe won't move much in a day.

I agree with everything you said
I bought a weekly calendar on SPY ATM (335) for 0.35 on 8/10 and 2 days later it was the same price while SPY only went up about 2 points and VIX went up 0.13 Meanwhile Theta was showing 19 and 22 for those 2 days so whatever Theta shows on the Price slice on TOS is useless It's whatever the market gives you not what the graph shows it should be
A day later the VIX was exactly the same as the first day I put it on and SPY moved up only 0.16 points from the day before so that's 4 days after I put on the trade and I finally got a bump in the P/L of $24 while Theta was showing 18 for this day
It sems like you have to hold the calendar into expiration to squeeze all the p/l out of it assuming SPY does not move much

I am turning more to Diagonals in SPX for a credit which has a closer theta relationship to the p/l than the calendars

I played with calendars and diagonals when VIX was much higher in the middle of the crash and had a much better performance than now when it is lower which seems contrary to the conventional thinking Of course there was also some backwardation so maybe that also had something to do with it
 

JeffP

New member
I am turning more to Diagonals in SPX for a credit which has a closer theta relationship to the p/l than the calendars

One thing I forgot to mention to everyone is GAMMA seems to be higher on SPY than SPX for the same trade, not sure why...
 

status1

Active member
If you mean 1 SPX for 10 SPY yes I see the difference but I am not sure if that has any meaning as long as the p/l is about the same
although the commission would be less
 
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