Calendar Spread Option Strategy

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Calendar spread option strategy. Setup of a calendar spread strategy. If a call or put is sold with near term expiration it is called front month if a call or put is bought with long term expiration it is called back month calendar spread on nifty. The calendar option spread is an advanced strategy that profits from both the decay in the option prices and the differential between the contract months and the downward directional movement of the underlying stock.

The calendar spread options strategy is a market neutral strategy for seasoned options traders that expect different levels of volatility in the underlying stock at varying points in time with limited risk in either direction. Bear calendar spread just like the calendar spread expect you sell near term put options that are slightly out of the money because you think the stock will go down in value. Calendar spreads allow you take advantage of cheap volatility.

Calendar spread involves options of the same underlying asset the same strike price but with different expiration dates. A calendar spread is an options strategy that is constructed by simultaneously buying and selling an option of the same type calls or puts and strike price but different expirations. A double calendar has positive vega so it is best entered in a low volatility environment when the trader believes that volatility is likely to pick up shortly.

Here are strategies similar to a calendar spread. A double calendar spread is an option trading strategy that involves selling near month calls and puts and buying future month calls and puts with the same strike price. If the trader sells a near term option and buys a longer term option the position is a long calendar spread.

Tom sosnoff and tony battista discuss calendar spreads when trading options. If the trader buys a near term option and sells a longer term option the position is a short.