Explore Your Options by Tom Gentile
How dependent is a calendar strategy on sideways movement?
A sideways-moving market is important, but not as important as the volatility of the options that are being used to create the calendar spread. The best calendar spreads I have seen in the markets have two important traits:
1. The options volatility of the month sold is higher than the month bought. This is referred to as volatility skew. Since volatility is the mean reverting, these usually come back together. . .