Q12. 1) An investor long multiple calendars and claims the probability of gains are much higher than single calendar and the risk is very low. Do you agree? Why?2) If you think the risk is actually very high, how will you manage the risk?
Long calendar strategy is one where you are buying and selling an option with the same strike price but with different expiration date. For example, in a long calendar call spread you buy a call and sell a call but the long call has a longer maturity than the call that you sold. The risk is not reduced significantly especially because to setup a multiple long calendar spread, the cost of setting including the transaction cost might exceed the benefit so the risk is not being reduced significantly and it is higher than single calendar spread. The cost of setting up multiple long calendar position would outweigh any small benefit that might occur. One alternative to multiple long calendar spread is create a short straddle position. The short straddle position can actually keep your cost limited and given your expectation might benefit you also.
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