An alternative trade for iron condor traders who are curious about other option income strategies is the double calendar spread.

What exactly is this trade?

The double calendar is simply two separate calendar spreads located on the same stock or index, usually placed on either side of wherever the underlying is presently trading at.

What are calendar spreads?

A calendar spread is the sale of a front month option at a exact strike and the purchasing of a further out month option at the exact same particular option strike.

Here is an example:

Sell 1 June 30 Call Buy 1 July 30 Call

The way this spread generates profits is from the variances which will arise in the volatility stages of the 2 different strike options, as well as from the fact that the front month option will without a doubt decay at a swifter rate than the deeper further out month option.

A lone calendar spread can make a considerably skinny profit tent on the risk graph. However, when two calendar spreads are put on either side of where the underlying is buying and selling at, setting up a double calendar spread the profit tent widens out greatly, overlaying a larger sized range both above and beneath where the stock or index is currently located.

Following is a sample of a double calendar spread with XYZ trading at 30.

Sell 1 May 15 Put Buy 1 May 15 Put Sell 1 May 25 Call Buy 1 June 25 Call

A cool thing about the double calendar when compared to the traditional iron condor trade, is the fact that the double calendar spread will be significantly more flexible when large rapid movements occur in the stock market. If you were to view the risk graph of the double calendar spread right next to the risk graph of the iron condor spread, you would see how the 0 day active P&L line holds up much better over an extended range than the similar line on the risk graph of the iron condor trade.

Furthermore, soaring volatility rewards the calendar trade, basically pumping further gain into the position. So in a situation wherever the market suddenly tanks and moves downward, what might be a disastrous scenario for an iron condor trade could turn out to be a great circumstance for a correctly setup double calendar position.

To learn more about the Double Calendar spread visit Ted Ninos website at: http://www.doublecalendar.com Click here to get your own unique version of this article with free reprint rights.