Double Calendars Part 1 of 3 | The Complete Guide to Options Strategies

SPX double calendars this is where James was coming from this morning you know he said we have a sample down at 30 Amazon down $10 oh stop your stop your crying stop stop we heard you the first time McDonald's is down 40 cents it never goes down it's unbelievable McDonald's never gonna win two McDonald strength the Grayson company I can get you sandwich all right yeah ready yes sir SPX double calendars the boys have wanted to do this for a while since we get so many emails saying hey come how could we ever talk about double counters I tried this morning to do a ratio double counter didn't work but I never got filled and I if I'd put it in right I probably would had a better chance of getting filled but I I don't trade this very often because I don't like being on both sides of the market with calendar spreads I feel like it's kind of defeats the purpose yeah but bring time for Hitler in Germany yeah well you didn't say that I mean you've asked me if I seemed to producers yeah actually Bruce is a couple times that was like the original you know Mel Brooks anyway so we they finally decided to cover double calendars and James said listen they've got so many emails he's like I gotta do it mm-hmm so I'm like okay fine go do it let's see what you come on guys oh yeah listen I don't you know they just some amazing research and and this is something that that you know it was just like let's do it this is also just a very again I'm gonna say one more time about this market they trapped you yesterday they hooked you I think I had a good discussion this morning about talking about these financial stocks they when they capitulated at the bot that was the bottom they probably feel like that was like a little bit of a little capitulation this morning we just took back the entire day yesterday on the Nasdaq that's weird yep yeah last week and did we yeah and we got back all our money mm-hm so we'll take it last week we analyzed SPX put counters and managing losing trades at 50% of the debit paid the data made the case for aggressively managing winners but leaving the losers alone okay we've done this gazillion times ever had this discussion with you you know a gazillion times so let's take let's take a little look okay so SPX put counters we managed to 10% and we managed to 10% or 50% of max loss this is just a repeat of the market measure we just did on June 20th just nine days ago so we looked at the PL with the average number of days we looked at the average P&L per day in fact bad I'm gonna bring it's a little too early can I take it back so and we looked at the average Pino per day very interesting stuff but managing at 10% of max profit seemed to make the most sense so the guys decided well what if we extend this and just talk about it as a double counter spread so you do the put spread below and the call spread above we've generally found that just doing the put spread is the most reliable for us but we never looked at the statistics around doing both so today we shift our sites instead look at the double calendar spread this strategy combines the long put calendar in the long call counter at some point almost like at is at a dynamic Delta a certain amount of the way out of the money so let's say you pick 30 I usually pick 30 or 35 Delta so at that strike below and that Deathstrike above in that strike below the theoretical P help profile is similar to a short strangle while carrying positive Vega and positive theta all right so here's the study 2005 to present we looked at the SPX I don't usually do SP X but just for simplicity steak and sake and because it's cash settled this made the most sense to us we did we sent a lot of legs love it it's a lot of research we simulated it daily for 11 years it's just I mean we have so much data now that we can do this but good luck you know it it takes almost all day double counter long six days to expiration 30 days to expiration long the 40 Delta put and the 40 Delta call so they chose the 40 Delta from those sides so figured two strikes out of the money a couple strikes out of the money and short the same strike put and short the same strike call so these are just straight calendars 6:40 Delta long 40 Delta's short that's about two strikes have the money on both sides manage the winners at 10% 25% at 50% of the debit paid all the trades we held to front month expiration just to see the you know the final results so current SPX examples so this would be something we were looking at twenty to twenty four hundred and twenty four forty those are the 40 deltas I guess days to expiration 32 and 63 debit paid for the whole package about twelve dollars and thirty cents per spread or twenty four sixty and the profit target of 246 615 and twelve hundred hours so CEO comes out alright catch me with me so far this is a lot man this is heavy but we don't know how to present it any other lighter so you can go back to it look at it later and whatever you want to see managing a 10 percent led to both the success rate and the average P&L per day being the highest we would likely only consider this strategy in low implied volatility but how does this filter impact the results but so we'll take a look in a second so anyway manage to ten percent the success rate was 83 percent of the double calendar now that's because we've been in a rising market and with declining implied volatility so which is also a subset of or a factor of rising markets the average debit paid was two percent of the underlying price okay that must stay the same across the board and you see the drop-off in success rates as you go to 25 percent of max profit and let's see 25% of prep I think if they don't supposed to be 50% of max profit last one right they need to change that that's correct yeah John if you can change that last the last month the top sheet 50% of max profit the average number of days 16 days 23 days and 26 days and the average P&L per day which is what they were talking about was $11 $9.90 so the argument being made here again is probably for for the managing of 10% because the highest Pino per day and when you look at the numbers than the amount of time to train this trade it's the least amount of risk with the most amount of profits managing the quickest percent all the works which surprised me so oops when we looked at this with this is double calendars when the IV rank is that was high be ranked at anywhere right that's correct that was IV rank with in all environments this is when the IV rank is less than 25 so the debit paid would go from 2% down to one and a half and the success rate goes up a little bit 84% 69-61 across the board but your average P&L goes up by about almost 15 to 20 percent the number of days stays the same in the average Pino per day goes up as well so the impact of low implied volatility rank entries was minimal on trades targeted for the 50% return on capital however there was a fairly noticeable increase in the P&L when managing at 10 percent or 25 percent of max profit or of the debit paid shouldn't say max profit of the debit paid so what that means is if you bought the trade let's say the trade on average was you paid 20 just over 20 dollars from you know the average PL was $200 that's a nice you know anyway the numbers work out it's a yeah their numbers are better than I thought what I was gonna do this a great success rate and it's and it's nice bang for your buck should I was gonna do this morning because we were in low IB rank was buy to put counters in one call calendar and just the other goes we bought that put calendar by itself yesterday didn't we mm-hmm the SPX put calendar yeah the twenty we bought to August Sept 24 1065 for it just eleven eleven ten eleven ten this morning but we also already today yesterday you didn't do it on the clothes I mean no I didn't do it at great prices right of course however I was it at one o'clock yeah mm-hmm we're also in the july/august we have the to my August 24 2002 490 2390 and 2345 oh no it's just there inspected we have the 2390 I I'm sorry we close to 24 20 I apologize yes yeah we have the 23 910 do you know what price we did that one 11:05 it's 11:35 I asked you to scratch this two times already told me no it's just waiting for a dollar bet that's what you tell me that's a change your minds a little bit cuz you got the other one were you not gonna do it because I faced you right now and you got a man up and you just can't let you ego you let it get in your way you get in you wave your problem why did it take 35 cents um profits I want to make money I got you that's not making money not enough for the risk now takeaways Gallup this bread it's a dollar ten gallon this bread in sp why I'm talking take aways hold on I'm sorry calendars are a trade and we reserve for lo implied volatility environments that's me Anthony I'm talking you want to come up here you could talk I'm talking right now I'm surprised you didn't get the crappy that if you're more than you had good they couldn't I'm surprised no really good my dad mm-hmm Matt guaranteed kids in the neighborhood scared your dad no no nothing kids in the neighborhood they love my dad much like the single put counters double calendars historically performed with their fathers bosses much like single foot calendars double calendars has performed Sorek ly performed better with pasture management so what we've learnt throughout this whole process is if you're doing put calendars or Clarke all calendars independent of each other or you're doing them together manage them faster the reason we do SPX is because when you have an expensive calendar spread you can you can take small profits when you have a when you doing the spiders you're doing a you know a $2.00 count a $1 counter it's hard to take profits at ten or fifteen cents so at least if you're doing one that's more expensive you know maybe it makes some money and then counters are a trade that we reserved for low implied fault so the environments a double calendar could potentially be headed to our arsenal and you can do them in any ratio you want you do seven puts and five calls or seven calls and five puts that kind of thing to you

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Keywords: Investing, Investing for Beginners, Finance, Stocks, trading, options trading, Option, personal finance, how to trade, options trading strategies, Market, tastytrade, tastytrade network, tom sosnoff, tony battista, Market Measures, trade research, Double Calendars, Mike & His Whiteboard, Everyday Trader

Id: crBZ3dNJJ0c

Length: 11min 49sec (709 seconds)

Published: Wed Oct 25 2017