Income Strategies Gorilla Calendars (Dan Sheridan)

Favored Income Strategies:
Calendars
Double Calendars
Condors
Double Diagonals
Butterflies

Guidelines:
Vols less than 30
Predictable industry (no bio tech/drugs)
Look at the price chart (see if moved over 10% last month and why)
Don't place in earnings month or fixed announcements

Gorilla Calendars:
What are they: sell one month and buy next month out
Income spread b/c looking for near term short option to decay faster than back month's long.
How to find: IV is btwn 14-28. Looking to pay as little as possible
Most desired time to put on: 25-35 days from expiration
Execution is crucial! don't accept more than .05 off the mid, be patient for fills.
How much to pay: .10-.50, which is great. But nothing wrong with paying up to .90
Remember the Gorilla Calendar idea is to set up a one-month calendar take a small profit and run for the hills.
Time Premium: you want time premium of short option more than 50% of long option
Minimum to receive from short option: at least 0.30, which will usually be all time premium. Just remember the time premiums short should be at least 50% of time premium of long. That means if you sell an option for .30 you won't pay more than .60 cents.
When to take off profits: up 40% vs what you paid or debit. If you pay .50 take off for .70 typically in 2-4 weeks.
IV to be in the mid to low range in last one to one/half years. If at the high end make sure to stress test the calendar in the analyzer
Industry: no oils, bio techs, or other vol industries
Price: when trying to detect too much speed in the underlying vehicle:
?determine if the underlying moved more than 5% last week in one direction?
?last month was there more than a 10% move in one direction?
?in the last three month, was there more than a 15% move in one direction?
?in the last nine month, was there more than a 25-30% move in one direction?
**If you answered yes to any of these four questions consider waiting...

Look out for earnings months, no trade.
Skews: There should be no positive skew over four to five points b/f you put on a position. If one develops after putting on the position take it off.

Risk Management:
If you pay less than .40 for the gorilla calendar, leave it alone till expiration day unless you take off for 40% profit or more any time b/f that. On expiration day, take off the complete spread on both sides. Be careful if short option is ITM and time premium hits .05; you may get exercised on the short call. If you pay greater than .40 for the gorilla calendar take off when time premium of short options hits .05 unless you take off for 40% or more any time b/f that.