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Calendar Option Strategies

a. Calendar Option Strategy:

The calendar option strategy is a combination of two expiry option contracts. It involves shorting the ATM (at-the-money) call option & put option contract of near expiry & buying an ATM (at-the-money) call option & put option of the next expiry. 

Directional view: Neutral

Implied Volatility view: Increase

Max loss: Limited

Max Profit: Limited

Greeks impact:

Increase in IV: Positive

Theta Decay: Negative

Delta: Neutral

Unfavorable Scenario:

a. The asset price remains out of the breakeven range

b. Decrease in Implied Volatility (IV)

Payoff Diagram:

Calendar Neutral.jpg
Short Straddle

b. Short Straddle:

Short straddle options strategy is a combination of shorting an ATM (at-the-money) call option contract & ATM put option contract.

Directional view: Neutral

Implied Volatility view: Decrease

Max loss: Unlimited

Max Profit: Limited

Greeks impact:

Increase in IV: Negative

Theta Decay: Positive

Delta: Neutral

Unfavorable Scenario:

a. The asset price rise or falls significantly from the shorted strike price

b. Increase in Implied Volatility (IV)

Payoff Diagram:

Short Straddle.jpg
Short Strangle

c. Short Strangle:

Short strangle options strategy is a combination of shorting an OTM (out-of-the-money) call option contract & OTM put option contract.

Directional view: Neutral

Implied Volatility view: Decrease

Max loss: Unlimited

Max Profit: Limited

Greeks impact:

Increase in IV: Negative

Theta Decay: Positive

Delta: Neutral

Unfavorable Scenario:

a. The asset price rise or falls significantly from the shorted strike price

b. Increase in Implied Volatility (IV)

Payoff Diagram:

Short Strangle.jpg
Long Iron Butterfly

d. Long Iron Butterfly:

Long Iron Butterfly is a four-leg options contract. It involves the same expiry buying OTM (out-of-the-money) call option contract & put option contract & selling ATM (at-the-money) call option & put option contract. 

Directional view: Neutral

Implied Volatility view: Decrease

Max loss: Limited

Max Profit: Limited

Greeks impact:

Increase in IV: Negative

Theta Decay: Positive

Delta: Neutral

Unfavorable Scenario:

a. The asset price rise or falls significantly from the shorted strike price

b. Increase in Implied Volatility (IV)

Payoff Diagram:

Long Iron Butterfly.jpg
Long Iron Condor

e. Long Iron Condor:

Long Iron Condor is a variation of long iron butterfly strategies. It includes shorting a higher strike from ATM (at-the-money) call option & a lower strike from ATM put option and buying OTM (out-of-the-money) call option & put option.

Directional view: Neutral

Implied Volatility view: Decrease

Max loss: Limited

Max Profit: Limited

Greeks impact:

Increase in IV: Negative

Theta Decay: Positive

Delta: Neutral

Unfavorable Scenario:

a. The asset price rise or falls significantly from the shorted strike price

b. Increase in Implied Volatility (IV)

Payoff Diagram:

Long Iron Condor.jpg
Short Iron Butterfly

f. Short Iron Butterfly:

Short Iron Butterfly is a four-leg options contract. It involves the same expiry selling OTM (out-of-the-money) call option contract & put option contract & buying ATM (at-the-money) call option & put option contract.

Directional view: Non-Directional

Implied Volatility view: Increase

Max loss: Limited

Max Profit: Limited

Greeks impact:

Increase in IV: Positive

Theta Decay: Negative

Delta: Neutral

Unfavorable Scenario:

a. The asset price remains sideways on in a small range

b. Decreaase in Implied Volatility (IV)

Payoff Diagram:

Short Iron Butterfly.jpg
Short Iron Condor

g. Short Iron Condor:

Short Iron Condor is a variation of Short Iron butterfly strategies. It includes buying a higher strike from ATM (at-the-money) call option & a lower strike from ATM put option and shorting OTM (out-of-the-money) call option & put option

Directional view: Non-Directional

Implied Volatility view: Increase

Max loss: Limited

Max Profit: Limited

Greeks impact:

Increase in IV: Positive

Theta Decay: Negative

Delta: Neutral

Unfavorable Scenario:

a. The asset price remains sideways on in a small range

b. Decreaase in Implied Volatility (IV)

Payoff Diagram:

Short Iron Condor.jpg
Long Straddle

h. Long Straddle:

Long Straddle is the combination of buying an ATM call option & ATM put option

Directional view: Non-Directional

Implied Volatility view: Increase

Max loss: Limited

Max Profit: Unlimited

Greeks impact:

Increase in IV: Positive

Theta Decay: Negative

Delta: Neutral

Unfavorable Scenario:

a. The asset price remains in a range

b. Decrease in Implied Volatility (IV)

Payoff Diagram:

Long Straddle.jpg

h. Long Strangle

Long Strangle

Long Strangle is the combination of buying an OTM call option & OTM put option

Directional view: Non-Directional

Implied Volatility view: Increase

Max loss: Limited

Max Profit: Unlimited

Greeks impact:

Increase in IV: Positive

Theta Decay: Negative

Delta: Neutral

Unfavorable Scenario:

a. The asset price remains in a range

b. Decrease in Implied Volatility (IV)

Payoff Diagram:

Long Strangle.jpg
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