Be careful modeling calendar spreads

Someone reached out to me with a trade that apparently had a 100% profit probability and a very interesting payoff diagram. On a Tuesday, they sold a 3dte strangle (Friday) and bought a less OTM 6dte strangle (Monday). https://preview.redd.it/3xc0398ot8eh1.png?width=778&format=png&auto=webp&s=3c65d1cddc4d628d68138989a87e1ba3eb68cb20 [https://www.gammawins.com/calc?key=5qHz62LJ](https://www.gammawins.com/calc?key=5qHz62LJ) The caveat here is that option calculators use a fixed IV to model each contract that stays the same over its lifetime. But this is a gross simplification and simply not what happens in reality. On Friday, the short strangle becomes 0dte and its IV most likely spikes, whereas the long strangle spans the weekend, and since most of its lifetime is over the weekend, its IV is actually going lower. At inception, the short legs were at 10% and 13% IV, whereas the long legs were at 9% and 10.5%. When Friday actually arrived, the shorts spiked to 13% and 24%, but the longs fell to 8% and 9% at 10AM. If you enter those numbers instead, you get a very different payoff diagram for Friday 10AM. https://preview.redd.it/pc1yqyowt8eh1.png?width=778&format=png&auto=webp&s=a268dcb70b5fc608a2ec2f5e1d17da571286bd34 So the moral of the story is to be careful about the IV assumptions when modeling your trade. Especially if you trade calendar spreads over the weekend, but even a simple spread can cause similar modeling problems. If you sell a put spread and the underlying doesn’t move much, the short leg is pushed further out on the skew, so its IV will probably rise more than the long leg would.