Neutral to slightly directional, expecting price to stay near strike
| Strategy Type | Horizontal Spread / Time Spread / Volatility Strategy |
| Market Outlook | Neutral to slightly directional, expecting price to stay near strike |
| Risk Profile | Defined Risk (Limited to net debit paid) |
| Reward Profile | Limited but potentially high ROI if price pins near strike |
| Time Horizon | Short to Medium-term (Front month expires, back month held) |
| Iv Environment | Best when back-month IV low relative to front, expecting IV rise |
| Breakeven | Complex - depends on IV and time; roughly strike ± debit paid |
| Primary Instruments | FTSE 100 Index options, UK large cap stock options, US-listed UK ADR options |
| Mas Compliance | MAS regulated brokers required; options trading approval needed |
| Trading Hours | FTSE options: London hours 4 PM - 12:30 AM SGT; US ADRs: US hours |
| Contract Size | FTSE 100 options: £10 per point; Stock options: 100 shares typically |
| Settlement | FTSE options: Cash settled; Stock options: Physical delivery |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Defined risk spread; margin = debit paid |
| Cdp Account | Not required for foreign options; custody with broker |
| Singapore Relevance | Calendar spreads benefit from IV expansion; useful around UK events visible from Singapore timezone |
Same strike, different expirations. Sell front month (30 DTE), buy back month (60 DTE). Profit from front decaying faster than back. Maximum profit when price at strike at front expiry.
Theta differential - front month decays faster than back month. You're short rapid decay, long slower decay. Net positive theta if price stays near strike.
The net debit paid (back month cost - front month credit). Occurs when price moves far from strike and both options lose value.
Long volatility (long vega). Back month has more vega than front. IV increase helps the position. Enter when IV low, hoping for IV rise.
Front: 25-35 DTE (30 typical). Back: 55-70 DTE (60 typical). This 30-day spread optimizes theta differential. Too close = not enough differential. Too far = expensive.
Relationship between IV across expirations. Contango: near IV < far IV (favorable). Backwardation: near IV > far IV (cautious). Check before entering calendars.
Calendar with different strikes. Sell OTM front, buy ATM or ITM back. Adds directional bias. More complex but allows directional view.
When front month reaches 7-10 DTE, price still near strike, and roll cost is acceptable (small debit or credit). Rolling extends trade and captures more theta.
Two calendars at different strikes (above and below price). Creates two profit peaks and wider profit zone. Double the cost but more flexibility.
Events create backwardation (elevated front IV). Pre-event calendars sell expensive front but risk big move. Post-event calendars safer - enter after IV normalizes.
Analyze term structure slope and skew at each strike. Find where surface offers best edge. Trade mispricings between theoretical and market IV. Optimal calendar placement.
Unequal front:back ratio (e.g., 2:1). Higher theta but more risk. May create credit. Used in high IV environments. More complex management required.
Provide long vega to balance short vega strategies (iron condors). Combined: reduced vega exposure, maintained theta. Allocate 10-20% to calendars, adjust for IV regime.
Per calendar: Delta ±0.15, aggregate similar. Monitor gamma especially near front expiry. Track total vega vs IV view. Comprehensive Greek management essential.
Triple calendars (3 strikes), calendar condors (protected), ratio calendars (unequal legs), calendar + vertical combos. Increase complexity for specific views. Start simple.
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