Long Calendar Spread Strategy

With a calendar spread the underlying stock would need to make a pretty big move for the trade to suffer a full loss.

Long calendar spread strategy. A long calendar spread with calls also known as a time spread is a position made up of selling a short term call and buying a long term call with the same strike price. Looking at this example on axp the stock would need to have a 30 down move or 25 up move before suffering the maximum loss. 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.

Since both options use the same strike price. Setup of a calendar spread strategy. Calendar spreads are a great way to combine the.

Calendar spreads can be constructed with calls or puts. The long calendar spread is an options strategy that consists of selling a near term option while simultaneously purchasing a longer term option at the same strike price. The terms time and horizontal describe the relationship between the expiration dates.

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. When running a calendar spread with calls you re selling and buying a call with the same strike price but the call you buy will have a later expiration date than the call you sell. The long calendar spread with puts is also known by two other names a long time spread and a long horizontal spread long in the strategy name implies that the strategy is established for a net debit or net cost.

You re taking advantage of accelerating time decay on the front month shorter term call as expiration approaches. Usually traders would adjust or close long before then. The idea is that the shorter term call with more accelerated time decay losses value more quickly as expiration approaches and will hopefully be worth nothing or close to nothing at expiration while the longer term call retains most of its value.

Long calendar spread with puts option strategy a long calendar spread with puts also known as a time spread is a position made up of selling a short term put and buying a long term put with the same strike price.