Live Double Calendar Trade in SPX

Today , around 12:15 or 12:30 central, I did this trade in SPX: Buy 6  Dec 8  2600 C, Buy 6  Dec 8  2555 P, S 6  Nov 20  2600 C, S 6  Nov 20  2555 P, for $16.35 Debit. The long is 35 days from expiration and the short is 17 days from expiration. SPX was around $2586 when I did this.

Beginning position Deltas are near zero, the Theta is 38 and the Vega is 1277 ( 6 Contracts). For 1 contract, the capital required is the debit of $1635. 6 Contracts in this example would be about $10,000.

Dan’s 4 Step Risk Management Plan

1 Set up : Long Expiration 35 Days out and Short expiration is 17 days from expiration. Start position deltas near zero. Call Calendar is about 15 points up from current price and Put Calendar is about 30 points down from the current price.

       2 Profit target and Max Loss: Looking to make about 7-10 % profit and not lose more than say 10%. I bought the spread at 16.35 debit, so I would sell out for around $115 profit for each 1 Double Calendar, or a credit of about $17.50 for the Double Calendar. If the Double Calendar Debit starts going under $14.75 debit, would get out for a loss of around 10%.

       3  When to Adjust? Would look for a possible adjustment at either the short strike on the call side, 2600,  or 10 points before the short strike on the downside, that would be 2565.

        4  How to Adjust?  On the upside, I would take off enough Put Calendars to reduce my position Deltas ½ to 2/3.  On the Downside, I would take off enough Call Calendars to reduce my position Deltas ½ to 2/3. If the SPX was up or down close to 1% in the SPX at the time of Adjustment, would buy a put or call to reduce my position Deltas ½ to 2/3.

Note: Beginning Traders or those who haven’t done 10-12 Double Calendars live, keep it simple and only do Step 1 and Step 2, that would mean you are doing no Adjustments.

Dan Sheridan

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