V. 19:10 (108-111): Tweak Those Spreads by Phillips Wiegand Jr.

Tweak Those Spreads by Phillips Wiegand Jr.

Is it possible to trade in any environment? Here are the basics of the calendar spread and how it can be used to trade the more volatile securities.

It’s no secret: Trying to gauge short-term market moves is a challenge. There have been too many times when it felt as though the major indices had hit a bottom. Nearly two dozen rallies since September 2000 have turned out to be bear traps. And each time traders have taken the bait, only to have the bottom fall out from under them as the broad market indices sliced through support levels. The glimmer of hope that keeps us in front of our monitors every day is the belief that the market will turn. Worse, although the market may seem to be turning around, who knows how long it will last? Do we want to keep banging our heads against the wall every day trying to take the long side and continue to be punished? Taking the short side can be just as frustrating and dangerous. How can traders take advantage of this seemingly endless cycle of no direction? It’s simple: trade nondirectionally.