Weekly double calendars on Indices (SPX, NDX, DJX)

[SureTrader 40]

I have been trading Weekly Double calendars (WDC) since April with good success. I know they are gamma and Vol plays along with Theta (but only at/ on expiration days). I have been targeting ~10% PnL exits.

My question is how to time the entries and exits more precisely. @Kim and @Yowster are awesome at this.

The reason why I am asking is after I enter 50% of the time the price of the calendar drops by 5-7%. It's very random and unpredictable but puts the trade in a major disadvantage. I tried entering the trades in the early hours of the day in the noon and sometimes before the end of the day. But the time of the day is not very helpful. I typically enter on the next week Fridays and exit on Thursdays or early Fridays.

@Volatilityhq doesn't provide data on non-EPS underlyings.

Here are my results. Not complaining about the results at all but just being a bit more greedy like everybody.😀

Edited November 13, 2020 by SureTrader

[Kim 7,474]

I think it's probably a good idea just to watch the spreads for a while and try to enter at the low end of the recent range. I'm not sure there is any time which is better than other.

[Ringandpinion 1,621]

I haven't looked recently but I'm about to re-fund my IB account.  One of the reasons is that they make it really easy to chart spreads.  I closed my IB account before come on board at SO, but I'm looking forward to being able to chart a spread price again, if it works the way I remember.  TOS will only chart spread prices if that actual spread has traded.

[zxcv64 706]

4 hours ago, SureTrader said:

The reason why I am asking is after I enter 50% of the time the price of the calendar drops by 5-7%. It's very random and unpredictable but puts the trade in a major disadvantage. I tried entering the trades in the early hours of the day in the noon and sometimes before the end of the day. But the time of the day is not very helpful.

@SureTrader, I have experience of trading double cals on the SPX - I did a lot of them in March and April when the VIX was very high and they were good. However, after that I consistently started losing money on them as the implied vol fell but the SPX was still moving a lot, meaning I was getting hurt by the gamma. It's great to see that you have produced a very good return from them.

 

In terms of entry, the key thing is not what time of the day, or the day of the week to enter - I found it was more a case of with the vol difference between the short and the longs. So, if the front week shorts have a very high vol, and the back week longs have a lower vol, then that is the ideal time to enter. Double cals actually have quite a complex vega/gamma/theta dynamic I found (well complex for my little brain). There are many moving parts, and oddly enough theta being the least important of the 3 greeks. Sometimes, I found that the price of the dbl cal would drop even though the underlying index hadn't moved at all, and this was because of the subtle shifts in the volatilites. Many times, I found that the SPX would shoot past my strikes, and the cals would fall rapidly in value. Also, a lot depends on how many DTE's you have to your shorts. the less DTE's, the more sensitive the dbl cal is to all the greeks. I found dbl cals to be mainly a vega play.

 

If you are able to post an example of a trade, then that would be great.

 

 

Edited November 11, 2020 by zxcv64

[SureTrader 40]

@zxcv64 Yes. I agree with you about the vega being the main play. I do Friday short strikes and the following Monday options for the long strikes. So, 7 DTE for short strikes and 10DTE for the longs.  As you said the Friday options have higher IV vs  the foll Monday options which helps. I use 20 to 30 deltas for the strikes depending on the environment.

 

I must also add that I hedge the calendars with long call verticals in case the short strike price is breached. I only add the hedge if the price closes over the short call by the EOD. This limits losses toward IV collapse and price movement. It's a short and long gamma combo play.

 

I use SPX and NDX as underlyings. I manage these very actively which is good and bad in some instances but that's me. 10% PnL is my exit point. The last 2 weeks due to elections have been very profitable as you see in the graph. 

Edited November 11, 2020 by SureTrader

[NJ_KenRob 157]

@SureTrader Can you share what this looks like in ONE or detail a recent trade??

 

Edited November 11, 2020 by NJ_KenRob

[SureTrader 40]

I don't have ONE. Here is a trade that I am in now.

I will exit this tomorrow or early Friday. I will try a PnL of 10%.