I've been trading a dual calendar strategy for about a month and the results seem a little too good to be true so I'm hoping you guys can roast me and show me where I can blow up trading this.
The basic setup is to enter a 25 delta dual calendar when I think volatility is going to rise. Buy a 25 delta call and put and sell those same strikes two expiries nearer. I require the peak p&l diagram at the expiry of the short contracts to give at least one times cost and the middle trough/loss to only be at max 30% of cost.
I manage the trade by exiting completely at the expiry of the front if it's profitable. If not, roll the shorts forward. If it touches a strike early, I exit if profitable or roll if not. That's basically it. I avoid earnings and hold positions in about 10-15 stocks at a time.
The results are a bit unbelievable. Closed 25 trades or so in the last month – 80% win rate, average win 30% of cost, average loss about 20% of cost.
Is this normal for a dual calendar strategy? No home runs but steady winning with low draw down? How can this kind of strategy blow up?
Posted by aaaaaa321123
1 Comment
I like to call this the circus strategy because it’s fun while the show is on but sucks when the tiger escapes and bites you in the ass.