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Lord DarkHelmet

10/20/12 7:31 AM

#2717 RE: Fossil-Fuel #2716

The reason why you don't want to play a Calendar is that a Calendar benefits from an increased Volatility.

Currently, AAPL is already in its upper IV range, so there is little room to move on Volatility to benefit the position.

However, you can expect IV to drop precipitously after earnings, which will crush your position.

If you took it off before earnings, then it would be reasonable IF you opened the position prior to the IV jump going into earnings.

The one situation that Calendars can be effectively played going into earnings if you had the front short month expire before earnings and the long back month expire after earnings. In that case, your long's IV tends to go up into earnings and the short does not move quite as much.

Better to play VEGA negative positions on earnings and take advantage of the IV crush. This would include butterflies and Iron Condors.