Calendar Spread Quant Trading

In commodity futures markets the near month contracts react to supply and demand changed quicker than further month contracts most of the time.

Calendar spread quant trading. When the market is in backwardation can be a good time to enter calendar spreads because the front month volatility is higher than the back month. If a call or put is bought with long term expiration it is called back month. A quantitative approach for trading calendar spreads june 26 2009 by steve papale in the handy dandy options traders tool belt of trades one of the most versatile and widely used strategies is known as the calendar horizontal or time spread.

In calendar spread we enter a long and a short position at the same time on the same underlying asset at the same strike prices but with different expiration months. A calendar spread is a strategy involving buying longer term options and selling equal number of shorter term options of the same underlying stock or index. A calendar spread is a long volatility trade so tends to benefit from rising volatility after the trade is placed.

As a result a trader can implement a trading strategy called calendar spread which aims to gain from the difference. A calendar spread is a trading strategy for futures and options to minimize risk and cost by buying two contracts or options with the same strike price and different delivery dates. Then calendar spreads might be for you.

The last risk to avoid when trading calendar spreads is an untimely entry. I decided to take a time out to experiment with a slower version of one of the trades a calendar spread in vix futures that trades the. Also both options are of the same type meaning strategy can be created with either both calls or both puts.

I have been working on developing some high frequency spread strategies using trading technologies algo strategy engine which is extremely impressive more on this in a later post. There are two types of calendar spread. If a call or put is sold with near term expiration it is called front month.

Calendar spread involves options of the same underlying asset the same strike price but with different expiration dates.