Calendar and Diagonal Spreads

It was brought up to discuss the mechanics of calendars and diagonals. I have posted a few times about this, but since I did the webinar last Thursday, there may be many that are new to this.

Calendars (some times called horizontal) spreads are no more complex than to know you are buying a farther out month (say Jan '09) and then selling a closer month (June '08) Same strike different month. Example buy a Jan '09 50 strike and sell a June '08 50 strike.

A diagonal is no more complex. The difference is we are now selling a different strike. Example.. Buy the Jan '09, 50 strike and sell the June '08, 55 strike.

That's it simple and very basic. the challenge comes in to play on how you as an investor wants to play these. that is where the experience comes in.

Are you very bullish, mildly bullish or neutral. Are you an aggressive trader or one that wants to preserve capital or maybe hedge against something else.

If you are very bullish, then you look to diagonals. If you are aggressive, you take on a wider spread. Example.. Instead of the Jan 50 and the June 55, you could go Jan 50 June 60 etc.

You can be neutral or mildly bullish yet still be an aggressive trader thereby doing a calendar but closer to the money (conservative) or farther out of the money (aggressive)

You can also decide how aggressive you are as a trader or on each trade. More conservative you would want to go farther out months say leaps etc.

So I gave you some knowledge here to blow yourself up. Try to virtual trade and find out
First, am I an aggressive trader. I myself am very conservative
Second am I bullish or bearish a certain sector.
Third how bullish or bearish am I
Fourth, how aggressive am I on the underlying investment.

Do not despair, we will discuss these at great length. For now, start to virtual trade and find where you are on the speculation spectrum.

Feel free to refer your friends to this site

World out look for commodities

World demand is increasing. Several reports are telling us that world grain and metal stockpiles are at record lows. We already know that world stock piles of oil are low, now we are getting grains and also metal (not just precious but also industrial).
Fun times. Just make money off this. Other wise it should be a brutal time for wage earners not to mention retired folks. Maybe you can offer some help to them. Refer them here and see if they can learn something to help them.

Even though we will see record prices, we are entering a phase that makes for wild times. About the only way I know to not get wiped out trading options would be playing this with options can be LEAPS or cal- diagonal spreads. If you do not understand them, speak up.

Commodity ETF's

Here is a lsit of them. Have a look see.

DBC,GSG,DJP,GSP,RJI,GSC,GCC,RAW,PCRCX

DBA,JJG,JJA,COW,RJA,FUE,GRU,EOH

USO,OIL,DBO,DBE,UNG,GAZ,JJE,RJN,USL,DCR,UCR

IAU,SLV,GLD,DGL,DBP,DBS,DBB,JJC,JJN,JJM,RJZ

It was fun hope everyone got something out of the webinar

Go with the weakness

The bonds are showing signs of stress. We filled with the TLT put cal and so far so good. We will stay on course for this. Looks like the economy is slowing and the feds rate cuts didn't have the effects it was counting on and so inflation has raised its ugly head. so that we are to now have the feds raise rates giving us an opportunity for shorting bonds. This may be for a few years here folks so it is not a quick in and out trade.

Turning to internationals, Asia and Latin America will leave us in the dust in the years to come. You can sit back and watch or get on board. Kind of like the discussions I have had of late about oil prices. After I hear the others gripe, I ask them if they own any oil stocks? Interesting responses.

The short of it, you can complain about what is happening, or you can take advantage of it. Not that I am in favor of what I see, but it does me no good to complain. I try to change with my vote, but I also am a realist and I see opportunities here that most do not.

A published article

Check out an article I published.
http://www.goarticles.com/cgi-bin/showa.cgi?C=937081

Short Bonds

Last week I got filled on TLT put calendars. Now we hear the feds claiming no more rate cuts. This should make for an interesting week with the bonds clearly becoming weak now. After all ow much lower can the feds go now that their counter parts over in Europe have not followed suit.
I also look for Latin America to continue to explode. Asia markets as well. However since many Latin America countries are solid with natural resource companies I like them better right now. I plant to go long a diagonal on EWZ some time this week.

P.S. sorry about the delayed postings.

P.S.S. Remember these are for educational purposes and not for real trades.

Update

Had internet problems at home and so the blog is a few days late for posting.

We had the feds drop rates once again. No shock. What we are looking at now is bonds to start imploding. I am trying to get a long calendar put on TLT. (this is not advise this is for educational purposes).

Still long natural resouces with the expectation that the trend will continue up in the next week or so. We got the correction we were looking for. I just wished oil had come down more. That one has me concerned that it will still drop.

The volatility should continue. It usually does in environments such as these, but that is good for selling strategies.