Long Put Calendar – A Strategy Overview

• Strategy: Sell ATM 30 days put options contract + Buy ATM further month to expire put options contract (ratio of 1 to 1)

• Number of legs: 2

• Market Prognosis = Range-bound or Sideways (stock going nowhere)

• Implied Volatility = In the low 20% of the last one year for the long leg. Short leg’s IV should NOT be greater than 15% of the long legs – IV skew.

This requires specialist software such as Optionetics Platinum.

• Expiration Month = 30days to expire

• Cost = Risk = Max Loss = Premium paid for the calendar spread = premium paid for long leg + premium received for short leg

• Max Profit = not fixed and best calculated by software such as Optionetics Platinum

• Upside and Downside Breakeven Point = not fixed and best formulated by software such as Optionetics Platinum

• Margin = None

• Advantage over Straight Call or Put and Stock = Make money when stock goes no where.

• Advantage over Call Calendar = Usually cheaper + No risk for dividends in case of an exercise

• Advantage over Short Put or Call Spread = Lower Cost

• Disadvantage over Stock = Limited time to be right.

Tags: Calendar, Long, make money, put, range bound, sideway, stock options

Category: Calendar Spreads