During periods of extended rallies and low IV we may look to trade calendar spreads. With a directional bias, we wanted to test how lower probability calendars compared to ATM calendars as well as put debit spreads.
We tested downside put calendars into up moves (up 5% in two weeks) over 5 years in IWM and EWW.
You can easily see that buying a calendar that is 1 strike OTM outperforms the other "cheaper" calendars.
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