What do financial advisors need to know about Calendar and Diagonal Spreads?

Listen to Advisors Option 68: Calendar and Diagonal Spreads

Options 101: Calendar & Diagonals

  • This strategy combines a longer-term bullish outlook with a near-term neutral/bearish outlook.
  • Variations?
  • Profit/Loss and breakeven
  • Volatility, time decay and assessment risk
  • Calendars vs Diagonals – when should you use one over the other?
  • Using long dalendars during earnings

The Buzz: What news do informed advisors need to know?

  • OCC cleared contract volume increased 8% in May.
  • Google search data reveals options trading search interest is roughly half of what it was in 2004.

Office Hours: Listeners weigh in

Options question of the week: Google Trends is full of interesting, and surprising, data. When you analyze the “options” search data you uncover some surprising results. Which brings us to this week’s question: Which “sub region” is currently ranked 1 for overall “options” interest by Google?

  • Illinois
  • California
  • New York
  • Maine

Listener questions and comments

  • Comment from TMal – So I have this exact thing going on right now, put diagonal with different futures underlying. 90-day difference, the Vegas act totally different, throw some futures spread risk in there, hard to quantify exactly what’s causing the changes in the P/L, futures spread? Vol spread? Net deltas? Net thetas? It’s complicated stuff. Nuances indeed holy cow. Plant the seed and let it grow naturally.
  • Comment from AKeats – Just discovered the radio show, and I am absolutely hooked! Great content!
  • Question from Brad K. – I’m learning a lot from you guys – particularly about the value of hedging. I also took your advice and switched to an advisor who uses options much more actively. Now I’m starting to spread my wings to the commodities particularly crude oil. I want to hedge my oil exposure with WTI options. Does the Swan DRS on crude use WTI or USO options? Also I would please like to know the panel’s thoughts on trading options on commodities vs. equities. Any major differences I should be aware of? Thanks again and please keep the education coming our way.