Stocks & Commodities V. 25:5 (18-26): Sidebar: Trader Dan on guerrilla calendars by John A. Sarkett
What are they? Sell one month and buy next month out.
Citigroup: $50 buy 10 November 50 calls and sell 10 October 50 calls
Is this an income spread?
Yes, we hope to make money by the near-month time premium decaying faster than the second month and the stock staying in the vicinity of the short strike.
How to find guerrilla calendars: Implied volatility is between 14 and 28. You’re looking to pay as little as you can for the spread. Most desirable time to put on: 25–35 days from expiration.