Options Jive

Monday – Friday | 8:40 – 9:00a CT

Calendars: Why Use Higher Priced Underlyings?

Options Jive

For this segment of Options Jive, Tom and Tony discuss how we can trade smaller with lower priced underlyings. Given the lower commission world we now live in, it’s possible to replicate larger positions with their corresponding ETFs.

Much of our recent Low IV trading and research has focused on Calendar Spreads.

Specifically:

  • Put calendar spreads
  • Long the 40 delta Put (60+ DTE)
  • Short same strike Put (30+ DTE)
  • Managed for: 10%, 25%, or 50% Return on capital

We take a look at how lower priced ETFs such as XLF, GDX, SLV, and EEM perform with this strategy.

Results:

Cheaper ETF products do not make good candidates for calendar spreads due to the lower profit potentials.

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