Letters To S&C by Technical Analysis, Inc
Perhaps in a sequel to “The Double Calendar Spread” (Stocks & Commodities, July 2010), author Jay Kaeppel might compare the double calendar to the iron condor. I’ve had limited success predicting the outcome of calendar spreads, primarily because their risk curves do not accurately reflect the spread’s value as the near-term option approaches expiration. With their “sag in the middle,” the risk curves for the double calendar seem to be far more uncertain than the “plateau-like” risk curves of the iron condor, whose risk/reward is comparable to the double calendar.
Incidentally, Kaeppel’s book, The Option Trader’s Guide To Probability, Volatility, And Timing, has an excellent chapter on calendar spreads.
Las Vegas, NV