GLD Calendar Spread Option Update

Calendar spread option update: It’s been a few days and GLD continues moving up slowly.

The weekly calendar needed to be adjusted but since it expires today I am not posting the picture here.

The Oct/Nov Calendar is still within the breakevens. It is trading right now at $126.72 and the upside breakeven is $127.95. Here is what the trade looks like right now. Notice how it has gotten close to the upside breakeven.

GLD Option Calendar Spread

GLD Option Calendar Spread

Calendar spread example

If I add the 128 Oct/Nov Calendar it will look like this:

GLD Calendar Spread Update

GLD Calendar Spread Update

This will center GLD in our trade and extend the breakevens. But I am going to hold off making this adjustment until GLD moves up a bit closer.

Adjusting calendar spreads

When adjusting you need to look at multiple factors. Time decay is working in our favor and so holding off on an adjustment can result in a higher yield. Also, even though the trade is far from the breakeven point I am still down about 5% so far in the trade. I don’t want to be down a lot more before I adjust because a sharp up move would force me to exit the trade at a max loss.

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1 Comment

  1. Rod on October 10, 2011 at 4:13 pm

    how does the backwardization of the front month having a lower implied vol than the back month affect the time decay of this trade?

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