** Income Calendar in SPX

[Steven Place]

The VIX is really low so the best income trade right now is a calendar.

Buy to Open SPX May/Jun 2070 Put Calendar @15.00

If/when SPX moves 40 points in either direction we’ll add another round of calendars.

If SPX continues to squeeze after that, then we will roll the losing calendar to new strikes.

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[Cody]

Any reason this wouldn’t work on SPY with 207? Only reason I ask is that when I priced it I sort of expected it to cost about 1/10 of SPX, or $1.50, but it’s showing me about $1.80.

[Marco]

1) Why an atm calendar? I guess you are not going for the reversion with this one
2) Why do you say that if we keep squeezing in one direction on another, instead of a third add, we will have to roll out the first calendar? Usually the adds are 3. Think 2) is tied to 1).

[Steven Place]

@Cody, yes you could do the same thing on the SPY. The reason you may be seeing a difference could be related to the SPY dividend and how it’s priced into the options.

@Marco:

1. I tend to do reverting calendars on stocks that have rallied hard, not necessarily on the broad market.

2. You could do a third add, but the odds of the market reverting all the way back to your first strike level is very low. It’s more cost effective to just roll the losing calendar.

[Steven Place]

I’m putting limit orders out at 18.00 just in case the vol structure changes quickly after the Fed minutes.

[Steven Place]

Ok I’m getting out of this trade here, it has decent profits but all it takes is 30 handles either way to lose it… and we’ve only got 2 weeks to opex so it would be difficult to recoup those gains.

Here’s the trade:

Sell to Close SPX Jun 2070 Put
Buy to Close SPX May 2070 Put

Credit: 17.20

15% RoR

[Author]

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