Calendar Spread Adjustment into Double Calendar

Calendar Spread Adjustment
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In this excerpt from our options mentoring course, Morris gives us some insight on adjusting the calendar spread. We look at morphing it into a double calendar.
Morris is the founder of San Jose Options.

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Calendar Spread Adjustment into Double Calendar

Video Transcript

The other thing we could look at is possibly putting up another calendar over here and see what that does. Let’s see how much that would cost. Notice here, it’s costing about the same, doubling up the trade but you can see how it’s adding this part here. It’s adding all this in. now we’re taking the profit zone and moving it over like that. We’re making it wider here and then you can see the probability’s like 54%. That’s at expiration. It’s not really that wide. The previous is over here. You can see the single is giving us about a 40% wide profit zone at expiration and if we were to put up this one, it goes about 54%.

You can see this type of trades and the market’s kind of not has been moving as much but you can just see how the probability’s just really low and it looks kind of expensive there. Sometimes their pricing is a little bit different by the way like on the—it’s showing it’s going to add another 8,000. One thing we see in this type of trading is an adjustment here is pretty expensive it’s not just like 10% more, whatever. It’s like doubling the cost. Both of these adjustments look really expensive.

Then the question is which one would be the better choice? Let’s see, this one here, this one’s the original trade. We add this idea…