One question with regard to the calendar spread Dan discusses …
Using his example, you would plan on closing out the entire spread before the Nov expiration date.
Is there ever a conceivable time when it might be more cost effective to let the November puts expire, but based on the current cost of the December puts, instead of buying those back, buying December puts that replace the expiring November ones … thus, leaving the bull put spread trade on for another month?
I’m having a hard time explaining what I’m thinking – but perhaps the cost of buying back the Dec $75 puts is so high, that it might be more opportunistic to instead leave those in place, and purchase Dec $65 puts to replace the expiring November puts – and thus, let the time value of the puts continue to erode, to maximize your profit.
Tim… Did you get a reply to the above? Scottto posted a good description last weekend of this trade using weekly options buying PUTs against the Dec short puts. I would also like an ongoing primer on the management of a trade structured like this (calendar/diagonal spread). NFLX is obviously working now. If it continues to work going forward why not keep it on? Question is just how to specifically do that. Any more words of wisdom on this from the team?
One question with regard to the calendar spread Dan discusses …
Using his example, you would plan on closing out the entire spread before the Nov expiration date.
Is there ever a conceivable time when it might be more cost effective to let the November puts expire, but based on the current cost of the December puts, instead of buying those back, buying December puts that replace the expiring November ones … thus, leaving the bull put spread trade on for another month?
I’m having a hard time explaining what I’m thinking – but perhaps the cost of buying back the Dec $75 puts is so high, that it might be more opportunistic to instead leave those in place, and purchase Dec $65 puts to replace the expiring November puts – and thus, let the time value of the puts continue to erode, to maximize your profit.
Tim… Did you get a reply to the above? Scottto posted a good description last weekend of this trade using weekly options buying PUTs against the Dec short puts. I would also like an ongoing primer on the management of a trade structured like this (calendar/diagonal spread). NFLX is obviously working now. If it continues to work going forward why not keep it on? Question is just how to specifically do that. Any more words of wisdom on this from the team?