Options Trading Update: Calendar Spread

I know it's been some time since I've updated the blog, but I have not stopped trading! I have switched gears in how I approach options trading though, and want to share what I've been doing lately. Instead of trying to capture weekly gains, I've switched to a more conservative, and longer term swing trading approach which not only feels better, but is less stressful, and provides more time for adjustments if needed.

Here's the last trade I placed (which was yesterday):

*

CALENDAR

11.50

100 SEP 14 1980 CALL

-

100 AUG 14 1980 CALL

+

I purchased, or bought the SPX 1980 September Calender for 11.50

This means I sold the 1980 CALLS for the SEP expiration, and bought the 1980 CALLS for the AUG expiration. The reason being, is that calendar spreads can profit from Volatility increases (High Vega), and since we are in a low volatility market, it stands to reason that we can possibly see some volatility jump at some point in time. It also gives me a 68% probability of profit, with a starting theta decay at around $100/day.

Here's what the risk profile looks like:

Now, I'm not planning on taking this all the way to the expiration date. The goal is to take 15-20% profit, and risk 10-15% of the capital used. I'll update if an adjustment is needed, and show you how I do that.

Stay tuned for the outcome of the trade.