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I need to know if the functionality that I'm looking for in option spread
trading exists in some software out there...
Here's what I'm looking for. One of my favorite option spreads is a
diagonal spread where I buy a 4-6 month out call our put and sell a near
month call or put against it. I'm trying to a)- sell more premium tham I
paid for my option over time or b) build myself a bullish call spread over
time using sold premiums to pay for my original cost. For example, INTU is
at 46, Buy Jan 50 Call, Sell Sep 50 Call. If price retraces or stays the
same, the Sep 50 will expire worthless, and I can then sell Oct 50. If
price moves up, then I'll be looking for an "opportune" time to buy back the
Sep 50 call and sell Oct 55. I'll vary strike prices and whether I enter
with call/puts depending on my outlook for a stock. For example, I may also
buy Jan 40 Put and Sell Sep 45 put initially, if I'm bullish on INTU, then
roll to either Oct 45 or Oct 50 puts depending on price action as we near
September expiration.
What I'm looking for is some software that based on the current option's
implied volatility, will allow me to model the rollover to a next month
option on my short options. In other words, what is the 'sweet spot' for
rolling over a short option to the next month expiration or higher/lower
strike price. I've found, in trading this scenario that sometimes the value
I would get from rolling over will drop regarless of the direction of price
over the next couple of days, so there is a 'sweet spot' at which I should
pull the trigger. I'd like to be able to find that sweet spot by having the
software model for me the theoretical value/bid/ask of the options over the
next few days, with the underlying at a specified range of prices.
Does the software exist? Remember, these are calendar spreads, I've found
software that does this for vertical spreads expiring the same month.
Thanks for any insight,
Ed Montero
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