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Andrew Falde teaches options back testing on LessThanRandom.com


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This is not quite right. The covered call you are describing is equal to selling a Put with the same strike price (\$105) and holding ( \$105 / (1+r) ) in the bank. If you draw the Payoff diagram this will become apparent. Put call relationships are summarized as the Put-Call parity: $$ S - C = D \cdot K - P $$ Where $S$ the underlying, $D$ is the ...


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Calendar spread is popular because it is versatile. A long calendar benefits from theta decay no matter what. Meanwhile, an investor enters into a calendar spread when a skew in volatility between front month (expensive) and farther dated months (cheaper) is favorable. In other words the terms structure of options is good for the long calendar owner. So an ...


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The main thing to keep in mind with all these different option combination strategies is that you are really trading option greeks! I think the answer to why the calender spread is so popular lies in the special combination of gamma and vega risk: Calendar spreads are the one type of trade where gamma can be negative while vega is positive (and vice versa ...


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You delta hedge if don't have an opinion of whether the stock will go up or down but think that realized volatility will be substantially different from implied volatility. If you don't delta hedge without having a view on the direction of the stock you are taking unnecessary risk.



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