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As a practical matter, I agree with you, but think about it. Your short leg is expiring tomorrow and IV is going through the rough. The long leg is a month away and it is normal to expect that since volatility reverts to mean over time, the long leg will be priced differently. There really is nothing magical about VIX. Why does backwardation occur? It is the fear for the front month that is excessive but it is anticipated that over a month it will normalize. Now SPX options have huge liquidity, so under normal circumstances, you will not see any issues, but the probability is distinctly there.

I believe this applies to VIX calendars only. I have never seem front expiration trading at higher prices than back expiration for SPX.

My guess is, since these are cash settled and cannot be exercised early, theoretically front month could lose money much more heavily than the long month. In american style options that risk does not arise because the ability to early exercise keeps arb between the front and long month under control. Not sure how IB manages this risk. I am sure if the short front leg starts getting really out of whack from the long, they'll jack up the margin.

Im told they have a crappy mobile platform but that they do have one. Im actually using livevol-x but they clear through IB and you can use IB's platforms if desired. $40 flat fee is way better though

This video describes Gamma and shows how Gamma impacts options pricing. It examines few live examples of different options strategies. Download video and slides: Options Greeks - The Gamma.wmv Options Greeks Gamma.pptx

The following video shows how the Vega impacts options pricing. It examines few live examples of different options strategies. Download video and slides: Options Greeks - The Vega.wmv Options Greeks Vega.pptx

As we all know, holding a calendar spread through earnings is an extremely risky strategy. It can work extremely well, if the underlying doesn't move much, but can result in a loss north of 80% quite quickly when the stock is making a major move. Since we can only guess what will be a move in a given quarter, holding a "naked calendar" isn't a good strategy, just a bet that you can sometimes win. At the same time, I believe that in certain conditions, coupled with an additional strategy, holding through earnings may actually be something to consider. LNKD is reporting tomorrow (July 30) after the close. The 3-week spreads that we have been trading have reached ridiculously low values when compared historically. For example, I entered the ATM 3-week spread (P227.5) today for $1.27. In some previous cycles a similar 3-week spread had cost more than $2.00. The reason the spread is so cheap is because the IV on the short leg is around 196 (!!) today, while the IV on the long leg is only 63 or so. Clearly, option players are betting on a large move (maybe given recent moves in AMZN, TWTR, NFLX etc.) and pumping up premiums of the shortest expiration (our July 31 short leg). The historical IV level of LNKD is around 30. Once earnings are announced IV will collapse, but of course won't reach 30 immediately. The short leg will keep IV elevated for a while and it will decrease as the day progresses - note that for the short leg (July 31) there is only one trading day after earnings - Friday, July 31. The long leg (August 21) will see its IV collapsing to at least 40 on Friday morning, and probably continue to decline during the trading day. For my little example, I calculated the theoretical values of the short and long legs after earnings (Friday morning) assuming that the IV in the short leg came down to 50 from 195 (50 is still very high), and to 30 from 63 for the long leg (crushing all the way to 30 in the first day after earnings is unlikely). These are very conservative assumptions, but I want to be conservative. Given these assumptions, see below the value of our 3-week Put spread for different strikes on Friday morning: Strike 3-week Put spread 205 0,46 207,5 0,62 210 0,90 212,5 1,23 215 1,54 217,5 2,01 220 2,52 222,5 2,89 225 3,34 227,5 3,76 230 3,88 232,5 3,90 235 3,92 237,5 3,67 240 3,27 242,5 2,92 245 2,54 247,5 2,08 250 1,63 252,5 1,36 255 1,06 257,5 0,76 260 0,58 Assuming we entered the trade ATM at the current price of $1.30 or so, based on this table as long as the stock is staying in the range 212.50 - 252.50 (about 20 points move in each direction or 9%) we should be fine. If the stock doesn't move at all, the spread value should be worth around $4.00. But if the stock is making a larger move, the position will start losing money quickly. So my proposal is to couple up the spread with two July 31 long spreads - calls and puts. For example, with the stock currently at $232.50, we can buy the July Call 245 (long) - 275 (short) spread for $6.00 and the 220 (long) - 190 (short) spread for $7. Jointly paying $13, which is about 10% of the price of the ATM 3-week, spread. So we will need a ratio of 10:1 between the calendar spreads we have and the long call and put spreads. Under this strategy, the worst points for the stock to open on Friday morning would be the break-even points of the spreads $252.50 and 212.50. In this case, the calendar spreads will break even and the joint value of the long calls and puts will be worth probably around $10-$11 (purchased at $13). So the "soft spot" of the trade is between $252.50-$257.50 and $212.50-$207.50). Any other value will produce nice gains that can be at least 50% if the stock doesn't move much, or if the stock moves a lot. Also, don't forget that I used extremely conservative assumptions for the IV crush, so spreads values should be much higher an hour or two into trading on Friday. My plan is to try to sell the spread I bought today at $1.70 or more tomorrow, and if I can't get this price, pair it up with call and put spreads and hold through earnings. Any comments would be highly appreciated!