| Reverse calendars mean you buy the front month option and sell the later-month option. It makes money when: 1) volatility declines since the short option has more time value and lower volatility means lower time value; and 2) when the underlying makes a strong move in either direction since the delta of the long option is greater than the short option in the direction of increasing value of the options and the delta of the short option is greater than the long option in the direction of decreasing value of the options. The risk graph of a short calendar is similar to that of a reverse iron condor. --- On Thu, 7/9/09, David Steele <dsteele_24@yahoo.
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