Options Talk - Episode 17 - mastering time spreads: calendar and diagonal strategies Options Talk - Episode 17 - mastering time spreads: calendar and diagonal strategies Options Talk - Episode 17 - mastering time spreads: calendar and diagonal strategies

Options Talk - Episode 17 - mastering time spreads: calendar and diagonal strategies

Options 10 minutes to read
Koen Hoorelbeke

Options Strategist

Summary:  In Episode 17 of 'Saxo Options Talk,' Koen Hoorelbeke and Peter Siks delve into the advanced strategies of time spreads, focusing on both calendar and diagonal spreads. This episode is a must-listen for traders aiming to enhance their options trading techniques through sophisticated strategies.


Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks.

Introducing episode 17 - mastering time spreads: calendar and diagonal strategies

"Episode 17 - mastering time spreads: calendar and diagonal strategies" offers an in-depth exploration of time spreads, a crucial strategy for traders dealing with options of different expiry dates. Koen and Peter guide listeners through the nuances of these strategies, providing insights on how to effectively implement them in various market conditions.

Understanding time spreads

  • Time spread: This strategy involves using options with different expiry dates to capitalize on volatility differences.
  • Calendar spread: Involves options with the same strike price but different expiration dates.
  • Diagonal spread: Combines options with different strike prices and expiration dates.

Key concepts

  • Volatility cones: Highlight implied volatility across different timeframes (1, 3, 6, 9, 12 months), showing that short-term volatility is more variable than long-term.
  • Profit from volatility difference: Time spreads exploit differences in volatility between short and long-term options.
  • Typical setup: Generally involves buying a long-term option and selling a short-term option, particularly effective when short-term volatility is higher.

Examples and strategies

  • Earnings play: Selling short-term options with high volatility (e.g., due to earnings reports) and buying longer-term options to profit from the volatility difference.
  • Low volatility environment: Consider buying short-term options and selling long-term options to leverage the volatility differences in a low volatility market.
  • Risk management: Time spreads generally have defined risks but can become undefined risk strategies if not managed correctly at expiration.

Practical tips

  • Monitor positions closely: Time spreads require diligent monitoring, especially as the short-term option approaches expiration.
  • Volatility graphs: Utilize tools like Saxo Trader Pro’s volatility graphs to assess implied volatility across different expiries, aiding in strategy formulation.
  • Experience required: Due to their complexity and need for active management, time spreads are more suitable for advanced traders.

Why listen to episode 17? For traders looking to deepen their understanding of advanced options strategies, Episode 17 of 'Saxo Options Talk' is essential. Packed with practical advice and expert insights, this episode will help you navigate the intricacies of time spreads, enhancing your trading repertoire.

Subscribe and stay ahead

Ensure you don't miss this insightful episode by subscribing to 'Saxo Options Talk' on Podbean, or on Spotify. Keep yourself updated with the latest strategies and discussions in options trading.

Join the discussion

After tuning in, join me on my Threads profile to share your thoughts and insights on the episode. It's an excellent platform for engaging with fellow traders and enhancing our collective understanding of options strategies.

Your questions, our answers

We're eager to hear from you! Send your options-related questions to optionquestions@saxobank.com. Selected questions will be addressed in future episodes, providing customized advice and insights.

Conclusion:

"Episode 17 - mastering time spreads: calendar and diagonal strategies" equips traders with the knowledge to effectively implement these advanced strategies. Koen and Peter’s expert guidance sheds light on the complexities of time spreads, offering actionable strategies to enhance your trading performance. Tune in to transform your trading strategies and master the art of time spreads with confidence.

Previous episodes of the "Saxo Options Talk" podcast
Previous "Investing with options" articles
Previous "What are your options" articles
Other related articles
Why options strategies belong in every trader's toolbox
Understanding and calculating the expected move of a stock ETF index 
Understanding Delta - a key guide for Investors and Traders
Trading 0DTEs - get your feet wet - without drowning

Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks. In Saxo Bank's Terms of Use you will find more information on this in the Important Information Options, Futures, Margin and Deficit Procedure. You can also consult the Essential Information Document of the option you want to invest in on Saxo Bank's website. 

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