Calendars vs Diagonals: When To Use Each Spread?
Summary
Sasha Evdakov explains the differences between calendar and diagonal options spreads, focusing on when to use each based on market conditions. He demonstrates how calendars at the same strike offer positive vega, while diagonals allow for directional bias through strike rotation. The episode covers constructing these strategies on SPX, adjusting for vega, and using diagonals as flexible alternatives to covered calls for traders with specific directional inclinations.
Topics discussed
Introduction: Calendar vs. Diagonal Strategies
Similarities and Vega Characteristics
Calendar Strategy Concept and Mechanics
Building Calendars and Adjusting Vega
ATM, OTM, and Bearish Calendar Variations
Transitioning to Diagonals via Rotation
Flexibility and Directional Bias in Diagonals
Diagonals as Covered Call Alternatives
Conclusion and Community Resources
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