carnyc

Agreed. I was able to profit on IBM and GS by exiting and adjusting at slightly different times. It was probably due more to luck than anything else. Makes sense that these would balance well with earnings straddles which stand to perform well during large market moves. Thx again.

Thanks Kim for the swift reply. Decent gains on IBM and GS calendars got me thinking about widening the application of the strategy. They seem a bit more predicable than earnings straddles where IV doesn't always cooperate. With the calendars, if the stock is stable, you will profit. If the stock moves, you adjust the calendar and profit so long as the stock doesn't keep jumping around. Will update this thread if I employ the strategy (successfully or not).

Have been thinking about trading calendars on lower volatility large cap stocks as a theta play. For example, selling last week Sept. CVX 125C and buying October 125C. The price is around .90 and theta disparity is about .025. Decent gains can be achieved in about 5 or so days if the stock is stable, but I'm guessing that commissions would give reason for pause. Thoughts?

Thank you Marco and Kim for the feedback. Kim, what you're describing (doing it hedged (buying further OTM options)) is an iron condor, and would help protect against a significant post-earnings stock move, correct? Agreed that it is more speculative and should receive smaller allocation, but I was thinking it might have some application where volatility is low (like now).

I'm sure this is not part of SO strategy, but with the market being as it is currently, if one were to sell straddles, strangles, etc. prior to earnings and hold through earnings, wouldn't that be a reasonable way to take advantage of the subsequent IV collapse? Obviously it depends on how much the stock moves, but where there is low volatility in the market, this seems like a viable play. Do others agree, or do you see it as outright gambling?