CRUS has earnings out on the 28th Jan so their puts have been showing some interest over the past few days - they've been on the Short Put list the last couple of days. I was looking at putting on a Short Condor - or something other neutral credit spread. But then I remembered reading about Double Calendar Spreads and thought I'd give that a closer look.
Double Calendars are when you buy an out-of-the-money call calendar spread (sell front month, buy back month) while buying an out-of-the-money put calendar spread. Sounded weird at first, but check out the breakeven points when I applied Friday's closing prices to the chart;
That's about 15% either side!
However, it does depend that I get filled on the spread at 0.15 debit. The mid point for all the legs was 0.10, so upping it up a little to 0.15 might get it done.
When I woke up this morning to check my orders, I see that the double calendar wasn't filled. The leg prices in the outright market show the spread offered at 0.55. So, I edged my order up a couple of times and was filled at 0.35!
Yep, paid up big from 0.15. But I was keen to see how this turns out.
CRUS saw a strong rally in the days before closing, trading above the short strike level of $26.
Being short the call option at $26 means that I am at risk of being exercised and could result be being short the stock at a sold price of $26. I watched the market during the last hour of trading to see if I would need to buy back the call prior to the close. I wasn't sure where it would end up, so I ended up buying the call back at 0.67.
I also needed exit the Feb part of the position, which was the $24/$26 Strangle. So I ended up selling that for $1.05.
The $24 Jan put option was way out of the money so that just expired worthless.
The net result of the trade was a small loss of $1.
|CRUS Double Calendar|
|CRUS Feb06 $26 Call||1||1.31||0.98||-33|
|CRUS Feb06 $24 Put||1||0.61||0.07||-54|
|CRUS Jan30 $26 Call||-1||1.24||0.67||57|
|CRUS Jan30 $24 Put||-1||0.29||0||29|