by billb
13. May 2009 14:22
I mentioned last week that I opened up a bearish calendar spread using SPY call options (strike 85). This makes my sweet spot between 84 and 85. I'll take 86'ish, but fear assignment moving into expiration month. I needed to basically have three things right, price, vol and time. So far the price and volatility are cooperating, but the time isn't. It's been less than a week and I'm nearly at my profit target (happened too fast!). As a result, the spread is showing a ho-hum gain of about $15 per spread. If we have another couple of big down days I'll be at the profit target and will settle for my profit, but it will be small relative to this price point being hit in June.
Hopefully this outlines in real time some of the nuances of options and in particular, the calendar spread.
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Options