A TastyTrader's Journey
One of the ways to deploy Calendars is right before earnings to capitalize on the volatility expansion that will almost always happen nearer to earnings day.
Calendar Spread Earnings Setup involves selling near month before earnings and buying far month after earnings. Otherwise, we follow many of Durational Calendar Spread rules. IVR should be low and Option Volatility between the 2 months which we are selling and buying should not be too wide. Looking at 20%-30% profit.
Liz and Jenny shared the following rules for putting on a durational Calendar Spread:
Short Put at 30-45 DTE and Long Put at 60-90 DTE.
Managing early at 10% increases profitability dramatically.
Liz and Jenny talked about looking for Calendars priced between $0.80 – $3.00. Also heard them talking about 3 types of Calendars and I am quite intrigued by them!
Calendar spread default:
Watch full video here.
So during low volatility environments, debit spreads are a strategy to consider. But there is better strategy – calendar spreads.
1 strike OTM (55% OTM) calendar spreads outperform debit spread
Put calendars are preferred to call calendars
20 Percent Freedom 