Calendar and butterfly spread option trades (FRM T3-40)

[@yannylaurel1588]

thanks sir, love these type of more "academically" explained videos!

[@snehavaradarajan3671]

Thank you so much for the information! The video really helps a lot in digesting hard informations

[@emmaxie5503]

Hiiiii these videos are really great! You have explained all the concepts super clear! Thank you so much! Just to check will we be able to have more videos coming up to explain other chapters in Hull because your explanation has really made the book easier to understand!

[@liangyumin9405]

great tutorials about financial engineering! THX

[@bionicturtle]

Thank you for watching! If you would like to be informed of our newest videos and other risk articles, sign up for our newsletter here: www.bionicturtle.com/blog/.

[@harshsingh-hp3uz]

no spread sheet provided for this calender spread?? Please provide the spreadsheet for the same?

[@bionicturtle]

I just added it to the description; here it trtl.bz/2Piz0O3 Thanks!

[@browsedrops]

Is the inverted butterfly a thing? Or would it not make sense.. also does it have a name?

[@ricomajestic]

Sure it's a thing! I use them once in awhile!

[@desisher5292]

With respect, there is no way that a trader would open a calendar where the short is 3 months away and the long is a ...wait for it...a year away. The whole basis of a calendar is the rapid theta decay of the short vs the slower decay of the longs - the key is to have the shorts which are closer to expiry (eg 1-4 weeks), when the theta decay is rapid. Also, expecting a stock to stay near the opening strike price in 3 months time is totally un-realistic. This video is a good theoretical exercise, but in practice there are many nuances involved in actually trading cals. J M below mentioned the role of Vega - he's right, Vega is vital and cals are very sensitive to changes in Vega, with each leg being affected at a different rate. FYI, I trade calendars on indexes (eg. SPX) and also on individual stocks leading up to the earnings period, where the Vega is rising up to the earnings date. On some high volatility stocks (eg NVDA, TTD), I often trade cals where the DTE for shorts is 1 week and the DTE for the longs is 2 weeks.

[@bionicturtle]

Okay thank you, I don't trade calendars so sincerely I appreciate the *realistic* color. This uses an example similar to John Hull's for the purpose of illustrating how (in theory) a calendar works. Thanks again!

[@ricomajestic]

If the IV is rising that will impact your short leg and your T+0 line will shift down and even become negative. If the IV decreases on your back leg then that would shift the P/L expiration line shift downward. How do you deal with the wild swings of your P/L, what adjustments do you make?

[@yvesprimeau6031]

easier to remeber