Explore Your Options  |  DEC 2007

Explore Your Options by Tom Gentile

Explore Your Options by Tom Gentile CALENDAR SPREAD QUESTIONS I have developed some indicators that give a fairly accurate picture of when a trend is over. In other words, when signal comes, I’m about 70% sure that the trend will either reverse or go flat. A calendar spread seems like a good tool for trading this kind of opportunity. I know what to do if the market goes against me and the trend resumes and know what to do if the market goes more or less flat. My question is about what to do if the market reverses enthusiastically and overruns the spread. Let’s say stock QRS has been declining through the month of April, then turns back up and I get a signal on the 25th of the month when the price is at $27. I decide to put on a calendar spread, selling the May $30 call and buying the June $30 call. But instead of going flat, the market takes off, heading for $30 and maybe then some.

by Tom Gentile