Calendar Spread With Different Strike Prices

Different types of calendar spreads.

Calendar spread with different strike prices. The spread attempts to capture premium decay as well. Speculative calendars have the strike price of the spread is far away from the current price of the stock. Spreads that involve buying and writing contracts of the same type same expiration date and the same underlying security but with different strike prices would appear vertically stacked on an option chain and as such are known as vertical spreads.

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. Horizontal spreads and diagonal spreads are both examples of calendar spreads. And different strike prices.

This strategy is ideal for a trader whose short term. 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. A calendar spread is a strategy involving buying longer term options and selling equal number of shorter term options of the same underlying stock or index with the same strike price.

It is sometimes referred to as a horizonal spread whereas a bull put spread or bear call spread would be referred to as a vertical spread. Calendar spread is a trading strategy for futures and options to minimize risk and cost by buying two contracts or options with the same strike price and different delivery dates. 1 long abc call with a strike price of 50 that expires in 29 days front month 1 short abc call with a strike price of 50 that expires in 57 days just like with vertical spreads there only exist four different kinds of horizontal spreads namely short call calendar spreads long call calendar spreads short put calendar spreads and long put calendar spreads.

The fact that the calendar diagonal spread has two different strike prices and two different expiration months is what comprises the strategy. A long calendar spread is a good strategy to use when prices are expected to expire at the strike price at the expiry of the front month option. I usually put calendars into 2 kinds of strategies.

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.