For calendar spreads, especially on underlying assets like $SPX, do you typically leg into the trade (e.g., sell near-month, then buy far-month later) or put it on as a single order? What are the benefits/risks of each approach?
Never leg into an SPX calendar spread. The bid-ask on those options can move against you instantly. One order, one price, less stress.
While single orders are safer, legging in allows you to be more selective about your entry points for each leg, potentially getting a better overall credit or debit. It's a trade-off between control and risk.
I find legging useful when I'm already in a position and want to adjust. For an initial entry, especially on a fast-moving underlying like SPX, a single order is usually the way to go to avoid unnecessary risk.
I always put calendar spreads on as a single order. The slippage potential when legging into $SPX spreads can eat into your profits too much, especially with tighter markets. Just my two cents.
Good question! I've done both, but lately, I prefer to leg in if I'm trying to optimize for a specific theta decay profile. It requires more active management, though, and you have to be quick.
Legging in can work if you're trying to capture specific movements in the implied volatility curve, but you're definitely taking on more execution risk. For SPX, I'd say single order for simplicity and risk management.