Double Calendars

I bring this up only because I hear much radio ads with Investools. One of the lines is double calendars. This is probably because of the need for something new.

Basically you are selling the front months strangle and buying far months a strangle. That's it...not worth paying big bucks to learn.

What you are doing is in essence selling strangles without the large margin required because they are covered by the far month longs you have. Allowing for several chances to sell these before the far month is reached.

Are they worth it? That depends on two factors. 1) The underlying is range bound meaning it is trading between a high and a low so that neither side gets assigned. 2) There is much volatility. This tends to inflate the front months more and you get more premiums.

Would I trade these? Not really. The charge for 4 trades in my humble opinion negates any real advantages. Particularly since we know that range bound stocks have a tendency to not attract option players.

Always remember that it takes someone on the other side to take your trade. If you expect a range bound stock, so does the other trader. The premiums typically will not be there. Now as we are taking about this, we are in wild times so you just may come out ahead doing one of these now, but these are not usual times. Place some virtual trades and see if you like this strategy.

A friend once called these several sided complex strategies "alligator spreads" because they end up biting you.

What do I know....