Market Measures

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Weekly Calendars

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

For this segment of Market Measures, Tom and Tony show why weekly calendars tend to not be profitable. Time spreads- Calendars and Diagonals- are low-risk strategies. But the downside of the small risk is that profits come in considerably slow. today, tastytrade wanted to determine if shorter-term time spreads could help improve performance, since the front month premium decay is much faster.

Study:
  • SPY, 2005 to present
  • Bought Weekly Calendars:
    -Sold 7 DTE 50 delta put
    -Bought 45 DTE 50 Delta put
  • Compared:
    -P/L at front month expiration date
    -Managed winners at 10% and 20%
Results:

No matter how we handle the position, the weekly calendars struggle to provide a positive return over the long-term. Also, the win ratio is too small to be a profitable long-term strategy. For more information on managing these trades (especially profitable Weekly Calendars), tune in to the segment or check out the slides.

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