Calendar Spreads

#1

I am looking into these as well, also calendar spreads

#2

I will reply to this sometime on Tuesday as well when markets are open and live. This can be done on binaries as they are single strike instruments like a call or put but they obviously are different than vanilla calls and puts. I will post some details on ways to analyze this strategy. Plus, I will do some comparisons to see how this would play out. I will also post some ideas on how to do this with spreads using a unique method i have been playing with on Calendars and Spreads. It will make for a good discussion.

#3

Hello Darrell, interested in what you have uncovered with respect to this strategy. Do you think there is a possibly to implement this with daily bull spreads and selling hourly binaries against it? Or vice versa?

#4

This would not be a calander spread. A calander spread would be selling binaries against binaries.

#5

WARNING - this is more advanced - if this is confusing don’t worry about it - it is more for those who have a lot of experience trading options there are plenty of strategies that are much simpler (like apex etc…) so don’t feel like you need to understand this to trade binaries.

I go through a lot of scenarios. Feel free to pick anyone of them out and ask additional questions if you have them.

Also please offer up ideas. This is the main goal of the forum is to explore possible strategies and systems and find strengths and weaknesses in them in order to develop a variety of solid trading plays one can use depending on market conditions.

I could probably write about a 150 page book on this one strategy alone - all the ways to implement it etc… - but i think the below will suffice for the forum and getting a good discussion going…

Okay so here is how it would work

This would be done on binaries - it can not be done on spreads (at least not with any kind of potential for good risk reward) without making it super complex which at that point it would cease to be a calendar spread.

A Calendar spread is a strategy used to try to collect premium (normally)

So the goal is to collect premium with a shorter term (option/binary etc…) and help offset the risk with a longer term expiring option and do this over and over…

You could also reverse this and buy the shorter term one and offset it with the longer one - but that has a whole other set of issues. If you want to explorer that let me know . i will discuss the premium collection strategy here:

Examples will cover the scenario where you think the market will move up some, stay flat, move down - (reverse of below is true if you thing will move up/stay flat/move down some)

Simple example…

  1. You would simply choose a strike price that you think is far enough out (i.e. 1.6 or -1.5 deviation level - etc… So you will probably want to be willing to lower the risk by babysitting if if doing it. Depending on your schedule, trading mentality, and discipline you will have to choose if this is okay with you. there are multiple methods to this we can discuss back and forth in forum if you want to dive de and buy it

  2. You would then sell one that expires in less time at or near that strike level

You will get less for the one sold than the one bought (also you will put up say $20 on the sold one (80 risk) and $30 on the bought one (30 risk) the sold one will only make $20 - so you will have to sell at least over 2 time periods to make at least 30 to pay for and ideally make a profit to cover the the 30 risk on the bought one

  1. you would sell additional ones hoping they all expire OTM

Important: you have to sell 2 intradays (different expiration) as you will get less premium on the shorter term binary than the longer term bought binary will cost - ie one that expires at 10 versus (sold at 80 (so 20 max profit) one that expires at 11 (bought at 30 so 30 risk) - and since it will expire you won’t have a chance to sell enough to recoup back the risk on the bought one (so you need the ability to have 2 expiration pass before the bought one expires (unless the market stays low - and then moves up before expiration of the bought one.

ie

8-10 am sell When expires then sell the 9-11 AM (note could also sell right when it opens for maximum premium but now you have more open risk as the 8-10 is still open) (exception - you may end up being able to close it early ie sold at 80 - bought back at 5 but this lowers your profit so it is harder to cover the cost of the bough binary) when expires sell the 10-12 PM (same note as above) when expires sell the 11-1 pm (same note as above) when expires sell the 1-2 pm (same note as above) when expires sell the 2-3 pm (same note as above) when expires sell the 3-4 pm (same note as above) daily buy

OR

buy weekly sell daily monday sell daily tuesday sell daily wednesday sell daily thursday sell daily friday

Risk management - & Alternatives

Market Moves Against Biggest issue on stops on the sold (premium collection) binary on risk management is due to the volatility of binaries you can’t put a stop order in - that would be dangerous if you could so its good you can’t -. However, this means you have to babysit it and be willing to close it without hesitation when market gets to that strike. So you want to account for will you try to do this or will you just take max risk.

So you will probably want to be willing to lower the risk by babysitting if if doing it. Depending on your schedule, trading mentality, and discipline you will have to choose if this is okay with you. So either you will do it and will execute it. So up front you need to choose you wont and are willing to take the risk or this is not for you so choose a different strategy.

Market Moves Up A You could close both the sold and bought binary this will lower your loss - ie sold at 20 - and bought it back at around 50 (if strikes lined up) 30 loss (Further out to expiry) Bought at 30 and sold back at 50 - 20 gain (closer to expiry) Total $10 loss (assuming $50 exits on both)

If it expires ITM (assuming you can get exact same strikes - then bough one would make 70 and sold one would only lose 80 - only $10 loss - so this is not a bad scenario as you can let it do its thing and possibly still profit.

Now if the strikes are not the same and you buy a higher binary than you sell (more of a diagonal calendar) then you could end up losing 80 on the bought underlying expires above it and underlying expires below bought one could lose 30 for a net lost of $110

Market Moves Down…

If the market moves down the sold will make $20 and the bought had until expiration to come back above and make a profit…Ideally it moves back up so you can sell one with some premium in it to cover the remaining $10 of risk and make a profit (remember the lower you sell a binary for the lower the profit and the higher the risk so keep this in mind…

Now another option is you may be able to close out the bought one at 10 if the market moves up enough and call it breakeven (less cost) for the day

You have to have a plan in place on what you will do and what the max risk you are willing to take on in place before you do this or you will get killed by random decision choices. So you have to map out your exact trading system on this strategy and follow it.

Other twists

You could do a ratio calendar spread - sell 2 on front intraday and buy 1 on further back time intraday (but the risk will be much larger)

another option is you could do a vertical - different strikes and time (though they will probably always be a bit different this could bea larger difference - issue is you will not make as much on the bough one on the move up to help hedge the loss on the sold one.

#6

WARNING - ADVANCED OPTIONS STRATEGIES ON BINARIES - don’t feel like you have to master it - but feel free to post questions and comments and ideas

This is one strategy i thought of as well. Really not a good way to do calander on spread versus spread without bad risk/reward scenario.

You could combine the two (either through calendar or same expiration)

You could say buy a spread and sell an ATM binary for around $50. If the market moves up spread makes money and binary looses. So long as spread moves up to cover binary loss then breakeven. If not risk is capped at binaries risk and the premium paid for the spread. If it moves down even a little binary could cover the risk of the spread. A very cool way to deal with some of those pesky spreads that have a lot of premium in them.

Note ideally you put the strikes together where the binary makes money if the spread recovers anything

ES at 1480 1480 us 500 binary (sold ie $50) and 1480 1510 spread bought bought for say 1483 - issue is - if bullish es would have to move up to 1488 to make the 50 risk on binary and the 30 risk on the spread. Advantage if it moves down/stays flat - then you will make 20 - 50 on binary lose 30 on spread.

You could sell a deeper ITM binary (between spread strikes) but if that strike is hit then spreads will have to make a lot to cover the loss - so you want to look at how much would spread be worth when it hit strike to see if this is a good idea

i.e.

ES at 1480 sell the 1485 binary for 30 buy the 1480.0-1510.0 spread for 1483- ES expires below 1480 - spread loses 30 binary makes 30 ES expires anywhere between 1480.01 and 1483 then 1.00 of loss recouped for every tick higher

i.e. 1481.5 spread makes 30 - us 500 spread only looses 15 - you make 15

ES Expires between 1483 and 1485 - you make 1.00 for every tick above 1483 (ticks in .1) and you get to keep the $30 from the sold binary i.e. expires at 1488 - (make 50 on spread - make 30 on binary - net 80)

Expires above 1485 (sold binary) lose 70 on binary - make 20 on spread + $1.00 for every tick above 1485 - so would need to move 5.0 (5 points/50 ticks) above 1485 (to 1490) to be at breakeven) after 1490 - you would then begin to make a profit…

Inverse is true - sell a spread and buy an ATM binary

Above is assuming you are using same expiration

(you could do this with different expiration - but this poses other risk - ie if losing on binary and don’t close spread profits you could end up losing on spread also. - You could also try to close both the spread and binary when the binary hits breakeven. I would be careful about setting a take profit on the spread as it may move fast and you give up the profits you need to cover the binary losses. Closing both when at or near the binary strike could lead to a close to breakeven, small loss or small profit trade.

Buy a spread and buy an ITM binary -

market moves up- make money - on both binary and spread, market stays flat - make money on at least binary and maybe spread

(this is probably the best of all scenarios as it is mainly bullish - but allows for a down/flat move to be cover some or all of the premium risk in the spread

market moves down a little- ITM binary (ie at 70 cost) - heges up to $30 risk on the spread

market moves down a lot - ITM binary could lose 70 and spread loses say 30 - so could lose 100 (downside to this is it increases risk - but also lowered movement requirement on spread allowing possibly no movement or even negative movement to still have small loss/breakeven or profit depending on prices of spread and binary)

The earlier you do this the more you get for the spread if ITM, but also the more time for it to go against you. Even so…this could be a great strategy to remove the premium risk from spreads I do like this strategy.

Other possibility is to use this as a calender - where you may be able to collect multiple premiums on long binaries - and make lot if spread moves up…but not risking the money on a spread by covering the risk with a binary (in case underlying is flat)…if you could pull off two of these of these say with 2 hour binaries on say a 9:30 to 4:15 spread and 8-10 and 10-11 binaries - - then you could use the profits to sell a spread and have a risk free trade (but you have to get past 2 expirations first without the binaries losing)

[b]Other thought not a good idea[b] buy a spread and buy an ATM binary - if the market moves up spread and binary make money (no real reason to do this as it is pure double bullish with no advantage except if it it moves up just a little then binary could cover spread loss - but if it moves down at all then you get hit on both (note just laying out different scenarios).

Bad Idea Basically buying a bull spread - and selling an ATM binary for about $50. You would not want to do an ITM binary as the risk/reward would most likely not work out well - moves up a little or stays flat you lose on both - moves down binary could cover spread loss - moves up must move up say 8 points to be breakeven - if bullish this is not the best strategy…

I look forward to any ideas etc… you have on this and how to take advantage of it - no matter what this is a strategy - you must combine it with a system (rules for entry exit -ie apex system or whatever you use), style (when to execute the system based on live market conditions), self (risk management)

#7

Darrell,

Thanks for the detailed reply. I am going to try some of these tactics post earnings. I think this would be great to have as a tool for flat days.

Kevin

#8

Definetely - also i have been checking them out on intradays as well - like today was pretty flat (before the bell) - some great trades…

#9

Darrell,

Just wanted to clarify a couple of points to make sure I’m following this…

Thanks in advance

#10

spyderman - updated the post with more accurate numbers - did this one a bit late - check it now should make more sense - keep the questions coming

#11

Ok I can’t wait for the videos, I needs to know. I’m still confused. when doing Calendar Spreads,

are you:

  1. BUYing a Far ITM Binary? or a Far OTM Binary?

are you SELLing an ITM Binary that’s close to the Strike of that other Binary?

Example: BUY AUD/USD Strike .9170 (OTM) for $20 Expires 3am,

then SELL AUD/USD Strike .9170 (ITM) for $15 expires 11pm.

Is that the Calendar spreads your referring too?? I’m trying to get a good grasp of this, but the descriptions above don’t specify, ITM/OTM. What are you looking for, please clarify.

#12

This is a long training not a short reply… Sorry will have to wait for video for me to work through all specifics and steps. There is enough here to keep you busy :slight_smile:

#13

urrrggghhh!!!

<img src=/uploads/db0876/1041/0e2c009d5f0939ca.jpg">

#14

lol figured you would say that

short answer calendar spread is 2 binaries - they have to be same strike or its a horizontal calednar spread

the front one will decay faster than the back one - so you would sell (collect premium on front) and buy (pay premium on the back as a hedge) -

ditm on the one sold (premium collection) dotm on the one bought (premium donation : )

you may sell multiple front ones - ie sell a 10,11,12,1,2,3 and buy the 3 pm that starts at say 8 am

sell the front hour expiration only

you have a hedge that will lower the loss if it goes against you on one of the expirations though it won’t eliminate it -

but the more you sell the more you cover the bought premium and then they start becoming “free” risking only profits at a certain point

this is super high level summary

#15

Thanks, I totally get it. I started practicing it already. But now I SEE Why you say summary. Because If you Sell AUD/USd .9460 10am @ $15 and BUY .9460 (3pm) @ $35, and price goes way down, you won’t be able to get .9460 for $15 at 11am. So then what would you be selling, especially if only a .9440 binary is available, and your still in the .9460 (3pm) binary. Would you stay waiting till 12pm binary until you can get the .9460 binaries again or do you do something risky.

Ohh man my head hurts, I see the potential of this strategy, but I want to know everything. I’m ready for it. Let’s do this D.M. lots of Starter webinars already, let’s move into advance. PLEASEEEE!!!

:slight_smile:

#16

so umm what was the question lol

I did BMX reversals and scalps last week - strangling binaries, straddling spreads etc…

all in good time…

Have you already mastered everything on this site… EPC should keep you busy 21 x a day - why such a passion for the calendars

#17

I mastered APEX Directionals, Strangles and StraddlesI know about the BMX reversals (not mastered yet), but I must’ve missed the webinar on Scalps AND EPC, but isn’t EPC End of Day Premium collection, I tried those before and wasn’t getting really good results.

Reason I ask, is cause I see the potential of Calendar Spreads, those Straddles/Strangles have lost me more money than they’ve made me in the past 4 months, but I still use them during Big nEWS. I’ll checkout that webinar you did on them.

However, these Calendars seem to possess really good Profit potential at lower risks. which is all I’ve been looking for. I’m always looking for extra stuff to do during slow periods when I can’t get the types of trades that I wait for. (i.e. I have a specific way of trading APEX (preferrably on AUD/USD and EUR/JPY, reason cause I can protect any losses with my strategy, I’ve tried that strategy on other markets, doesn’t work as well, due to too much choppieness before expiration.) But on days like Monday 7/15 where I couldn’t get the proper setup I’m looking for to do ITM P.C or Spreads, I want to try something else, such as Calendar spreads.

I can’t stand Butterflies, I lose too often, but my strategy works Great on APEX ITM P.C and Spreads, if the setup is there. I’m just looking for something Extra to work with, and Calendar seems to be it. It’s why I’m trying to rush it, cause I wanna combine it with my main strategy to make proper income that I need (5%).

That’s all I’m looking for. I’ve never asked you for anything ("I’m lying), but please do a webinar soon on it. Pretty please with sugar on top. :slight_smile:

#18

Okay so first thing first. Losing at a strategy does not mean anything. What is the sytem. Strategy is just a way to trade

Buy a binary sell a binary buy itm/otm/atm binary sell itm/otm/atm binary strangle binaries straddle spreads ditm binaries at expiraiton etc…

all these are strategies - a strategy is like the book of hoyle - different ways to play cards - they are not a way to win at the game itself

so if the strategy is not working my first question is always what is your system your method for determining entries/exits

EPC is among the best trades I teach. It is where you should be focusing. I had a lot of traders posting wining trades in p3 and elite rooms today on them. I do them almost every single day. Most likely you are doing EPC trades incorrectly comes down to the system not just the strategy. Make sure to watch education and be involved in the elite room. There where a lot of winning trades posted today doing epc in there today. Even newbies doing 1,2,3,4 trades one after the other. This is not a fluke it has been pretty consistent. I know traders pulling in insane somes of money and this is nearly all they do. Its worth the time to master.

I rarely do strangles. Mostly I do straddles. I don’t do simply high impact news. I use the trading stats provided on the news calendar. These are very important so make sure to check them out don’t just straddle every high impact event. And know when to exit at breakeven. Check the news plan it should help. Also check the traiings linked to in the new menu on how to do these trades properly. Knowing a straddle/strangle strategy and knowing there is a high impact news event is not enough you need the system for trading it.

Again butterflies - what is your system… I do them before or through the news with stats (think about it if your losing on strangles you would be winning on butterflies)… or I am do them off magnet prices

Calendars are much more complicated than the above 2 strategy/systems so i would not recommend even going there till you have them down. Before abandoning one strategy and running after the next make sure to get a system down with measurable results and decisions. Otherwise you will be on the eternal chase. We’ve all been there.

What is the challenge on 5% - should be 6 trades max to get there.

Sorry to disappoint but other webinars are on the table right now. It will be a while on this one. I can only do so many a week :slight_smile:

#19

Totally understood. I’ll try to master those EPC, I just couldn’t get a good grasp of it on that last webinar you did. I’ll post on that EPC topic in the forum. thanks!!