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The chart. As you can see, I’ve been following it for a while. It’s been channeling down, into this back… If you go back about a year or so, the high was 49. It’s currently selling for $27.09. We’ve had a little bit of a run up here in the stock lately, but it has been trending downward.
These actually can be very good stocks to put calendars on, because not only has volatility increased as stock as moved down in price, but also, they don’t tend to bounce back right away. They tend to channel, and they tend to move in a range for a while, before they start breaking out to the upside, if they do continue to the upside.
This may be a very good candidate for us. It looks like they just had earnings. You can tell on the profit chart – If you have it set up, I think you can go into “Chart settings,” go into your preferences, and there’s a couple of different things that you can actually put in here.
It looks like they include those symbols automatically. This is a good thing, because you want to know when a conference call or an earnings announcement has been made. It looks like they just had their earnings announcement. So, this is a very good candidate, then, for a calendar spread.
Let’s go back to our “Trade,” tab and take a look at the June options. We’ve got calls and puts, and we would like to do double calendars. Those are my favorite. You can also do single calendars, and later, if you need to adjust, go into a double calendar.
Let’s do a double calendar on Monster. We generally take the strike price that is just above the current price. The current price is $27.14. We’ll take a look at doing a double calendar on the 30 calls. Then, we want to do a put calendar as part of our double calendar, at the 25 calls.
Just right click and go to “Buy,” “double diagonal,” and then select “double calendar,” in the menu. Now, we have to change the puts on this. It automatically brought up our 30 calls, that we want to do. But we have to change the puts to the 25.
All right. Let’s just do one contract, for now. It looks like we’re going to have a debit of 85 cents, on this calendar. Let’s go over to the “Analyze,” tab, and see what this is going to look like.
Right click on the green boxes in your “Trade” tab, and bring up “Analyze duplicate trade.” You just do that by right clicking. Click on “Analyze duplicate trade.” Then, go right into your “Analyze” tab. Make sure you have “Single symbol” selected down here, under “Positions and simulated trades.”
Let’s see what this looks like. It’s not a bad looking graph. It could be a little bit tighter, maybe. The problem with Monster is that even though the stock price is only $27, we don’t have any other options besides a 5-wide strike in between these.
Let’s take a look at July. It’s about the same for July. What we might want to do, in this case, is simply do a single calendar. Let’s go back to our “Analyze” tab here, for a second, and delete that.
I didn’t like that picture. The picture didn’t look good to me. What we’re going to, is that we’re just going to go over here, and buy a single calendar on the June 30 calls. We’ll leave it at 1 contract for now. Then we’ll do the same thing – we’ll right-click on the green area, and go to “Analyze duplicate trade.”
As you can see, we like to be in the center of these trades, but this one is slightly off, isn’t it? The actual price is down here, to the left.
Let’s go to the 25, right “at the money.” That one is a little bit too far to the right. We might not have a good calendar here, either. We want this price to be right here at the center, and we’re just not getting it.
This may not be a good candidate for us. However, what we can do is take a look at doing both a call and a put, at the same strike price. In this case, we have the 25s there, and we can take the 25 and do a calendar on the put side, as well. Let’s take a look at that.
No, that doesn’t help us at all. Even if we went down to 22.5, we’re still way outside. We really want to be in the center of this tent, ideally, and not over to the right.
We’re going to eliminate Monster from our potential candidate list. It was looking very good here. However, we’re not getting the type of profit graph that we really need, to make this a profitable trade.