Comment on Calendar Spreads

Amey commented on 17 Dec 2018, 02:18 PM

I’m ready to hold till expiry provided the ROIC is good considering this strategy (absolute return expectations are low). No qualms. In fact, I would prefer to hold for long. And for being doubly sure, I calculate the theoretical value as well, along with a small scenario analysis if my assumptions relating to interest rates were different. But I’ve seen that there is always a difference between the ideal theoretical value and actual value; rather the prices are farther from ‘fair value’ most of the time and I’m okay with that.

But 3SD is a high benchmark. This problem won’t crop up at 3SD but even 2SD is rare and opportunities come and go quickly. One has to be almost glued to the screen to execute this. Have you completely automated the strategy?

Thanks btw.

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