Using a Calendar Spread to exploit High Volatility in the S&P500

Using a Calendar Spread to exploit High Volatility in the S&P500

This is a blog post for Paragon options showing one of our current live trades using the S&P500.  This strategy is a calendar put spread using a long 2700 ES Futures put out in June and selling weekly options against it.  The S&P 500 weekly options currently have a very high implied volatility and so this is an excellent time to take advantage of rich premiums.  The structure is explained in the video below.

 

Conclusion

As you can see from the video, within only one or two rolls of the weekly option, this position can quickly be in profit.  This is aided by the current high volatility environment which ensures you receive a good premium each week for your weekly S&P500 option.  The position also allows for some directional view on a week by week basis as the sold put can be moved up or down according to your current market view, as well as having the flexibility to be “built” into a bigger position over time i.e a 200 handle put spread.

Any questions, please post below or send a message on twitter which we will be glad to answer.

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About the Author

Matt
Matt is a highly experienced options trader of 18 years, having been a private client broker and an inter-dealer broker in the city of London as well as working internationally in Australia during the commodities boom. He is an expert in options greeks and their vagaries, as his positions are usually comprised of multiple strategies with him trading the net greeks rather than its individual positions. Matt is adamant that a comprehensive awareness of risk and greeks is vital to becoming a successful options trader and is able to set out options in a very clear and understandable way even for the beginner.

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