Using Options – a look at the Call Calendar

Author:  Derald Muniz

Date/Time:  07/20/2014 10 AM CST

 

One of the growing aspects to stock trading is the utilization of Options in trading. There are a variety of strategies available but I wanted to highlight the Call Calendar. I have several of this type of trade on for clients so I will look at a few existing trades to see how they are working. First, a brief description of the Call Calendar courtesy of the OIC:

Call_Calendar

 

Now on to a few existing trades.

Trade #1 in $QCOM:

  • original trade: Long the January 2015/Apr $80 Call Calendar for a $4.25 debit on 03/31/2014
  • I am currently long the January 2015/July 25 weekly 80/82 Call Calendar (so I will be addressing the short $82 Calls this week)
  • The current Options Net is -$1.13 so I have reduced the initial cost of the trade by $3.12
  • Current stock price: $79.39

So how did I get to this point? By one key task in this trade: selling premium against long Calls

  • higher strike than $80 preferably & as often as feasible to reduce the initial cost
  • I have sold premium 6 times since the initial trade (each time buying back the short Calls in the Calendar to sell future dated Calls, often viewed as an “adjustment” to a trade)
  • The goal would be to get the trade to FREE by the end of August
  • The next step then would be to start building a positive Options Net by continuing this process

Trade #2 in $SNDK:

Sandisk had earnings this past week and the stock was under a lot of selling pressure. Let’s take a look at how my trade as fared so far:

  • Original trade: January 2015/May 23 weekly 90/91 Diagonal Call Calendar for a $7.55 debit on 05/12/2014
  • I am currently long the January 2015/October 90/100 Diagonal Call Calendar (the adjustment to the short October $90 Calls was done on 06/04)
  • The current Options Net is -$7.40
  • I have made 2 adjustments up to this point
  • Current stock price: $94.52
  • The January 2015 $90 Call closed at $10.80 on Friday (long piece)
  • October $100 Call closed Friday at $3.72 (short piece)


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4 Comments to “Using Options – a look at the Call Calendar”

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  3. Gene says:

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This entry was posted on July 20, 2014 and is filed under Blogs, Options, Trading. Written by: . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.