Calendar Trading in 2018 with Dan Sheridan

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Calendar trading, a popular options strategy, gained significant attention in 2018, especially with the insights and teachings of Dan Sheridan. This strategy involves buying and selling options with different expiration dates to take advantage of time decay and volatility. In this article, we will explore the fundamentals of calendar trading, its benefits, and how Dan Sheridan’s expertise can help you master this technique.

Introduction 

What is Calendar Trading?

Calendar trading, also known as calendar spreads or horizontal spreads, involves purchasing a longer-term option and selling a shorter-term option with the same strike price. The goal is to profit from the differential in time decay between the two options.

Why Use Calendar Trading?

• Time Decay Advantage: Profits from the faster time decay of the shorter-term option.
• Volatility Play: Benefits from changes in volatility, particularly if the long-term option is more sensitive to volatility changes.
• Risk Management: Offers a defined risk strategy with the potential for consistent returns.

Dan Sheridan and Calendar Trading

Who is Dan Sheridan?

Dan Sheridan is a renowned options trading educator with over 30 years of experience in the financial markets. He is known for his practical approach to teaching and his ability to simplify complex trading concepts.

Why Follow Dan Sheridan?

• Expertise: Sheridan’s extensive experience and successful track record make him a trusted source for learning options strategies.
• Practical Approach: His teachings focus on real-world application and practical strategies that traders can implement immediately.
• Comprehensive Resources: Through his educational platform, Sheridan offers a wealth of resources, including courses, webinars, and live trading sessions.

Fundamentals of Calendar Trading

Understanding Options

Types of Options

• Call Options: Give the holder the right to buy the underlying asset at a specific price.
• Put Options: Give the holder the right to sell the underlying asset at a specific price.

Key Concepts

• Strike Price: The price at which the option can be exercised.
• Expiration Date: The date on which the option expires.
• Premium: The price paid for the option.

Mechanics of Calendar Spreads

Setting Up a Calendar Spread

1. Select the Strike Price: Choose a strike price that is typically at or near the current price of the underlying asset.
2. Buy the Long-Term Option: Purchase an option with a longer expiration date.
3. Sell the Short-Term Option: Sell an option with a shorter expiration date but the same strike price.

Profit and Loss Potential

• Maximum Profit: Achieved if the underlying asset is at the strike price at the expiration of the short-term option.
• Maximum Loss: Limited to the initial cost of setting up the spread.

Strategies for Successful Calendar Trading

1. Timing the Market

• Market Analysis: Use technical and fundamental analysis to determine the best times to enter and exit calendar spreads.
• Volatility Assessment: Assess current and expected volatility to choose the optimal time frames for the options.

2. Managing Risk

• Stop-Loss Orders: Set stop-loss orders to limit potential losses.
• Position Sizing: Adjust the size of your positions based on your risk tolerance and market conditions.

3. Adjusting Positions

• Rolling the Spread: If the market moves against your position, consider rolling the spread to a different strike price or expiration date.
• Exiting Early: Close positions early if the profit targets are met or if market conditions change unfavorably.

Tools and Resources for Calendar Trading

Trading Platforms

• Select a Reliable Platform: Choose a trading platform that offers real-time data, advanced charting tools, and efficient order execution.
• Analyze Historical Data: Use historical data to backtest calendar trading strategies.

Educational Resources

• Dan Sheridan’s Courses: Enroll in courses offered by Dan Sheridan to gain in-depth knowledge and practical skills.
• Webinars and Workshops: Participate in live webinars and workshops to stay updated with the latest strategies and market trends.

Common Mistakes to Avoid

Over-Leveraging

• Avoid Excessive Risk: Manage your leverage to avoid substantial losses and maintain a sustainable trading strategy.

Ignoring Volatility

• Monitor Volatility: Keep an eye on market volatility and adjust your strategies accordingly.

Lack of Preparation

• Prepare Thoroughly: Conduct thorough analysis and develop a well-thought-out trading plan before entering any trades.

Conclusion

Calendar trading offers a powerful strategy for options traders, providing the potential for consistent profits with controlled risk. By leveraging the expertise of Dan Sheridan, traders can gain a deeper understanding of this technique and apply it effectively in their trading. Embrace the insights and strategies shared by Sheridan to enhance your trading performance and achieve your financial goals.

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