GS Put Calendar - additional analysis

I did a detail analysis of the put calendar trade for GS yesterday, Oct 21st.

First, I define the level for the various trends. I use theta and delta to estimate the gains and losses as the stock moves in each direction. This will define the points that adjustment will be made.

In additional, I added a spreadsheet for automated calculation for future calendars. For those who are interested in getting a copy of the spreadsheet, please place a request on the comment section or email the post to me and I will send it to you.


Considerations

· Stock bounces off resistance despite good results
· Overall trend of stock = bullish
· Overall market trend = Bullish
· Credit ( 4.4 ) > time decay ( .09*30=2.7) = Good

Comments

· Note that Calendar wins 4 out 6 trends. While you can lose 100% if the stock goes very bullish or bearish, your gains are substantial in between.
· I am using theta and delta to project my ROI. I left out GAMMA but it has the effect of increasing my profit in a bearish or slightly bearish trend as it increases the delta as volatility increases towards expiration. GAMMA will benefit my long put.
· Maximum profit is achieved when stock is slightly bearish at 180
· Interesting to note that if trend is slightly bearish, LP may gain value but the time decay actually offsets the gain and results in a loss of –0.3
· Watch out for prices as it goes too bullish or too bearish and adjust accordingly. Execute your secondary exit without hesitation.
· Adding a protective call at 190 if the trend gets very bullish. The trade is effectively turned into a strangle once the SC expired
· Roll down