Calendar spreads cover several distinct strategies, each suited to a different view on price and volatility. They let you pursue the returns that time value can generate while keeping risk managed.
This article walks through four of them in detail: Long Call Calendar Spread, Long Put Calendar Spread, Short Call Calendar Spread, and Short Put Calendar Spread. For each, you'll find an overview, key characteristics, structure, sources of profit, and a worked example.
1. Long Call Calendar Spread
- Overview
A long call calendar spread involves selling a near-term call (Call A) and buying a longer-term call (Call B) at the same strike price. Both options are on the same underlying asset. This strategy offers limited profit potential while also capping potential losses.
- Features
- Components
- Profit source
Underlying price | Source |
Rise | Call B value increase |
Fall | Selling Call A and reducing cost |
- Case study
Let’s imagine a made-up company called TECH.
Right now, TECH’s stock price is $100 per share. You think the stock will stay flat in the short term but rise moderately over the next few months. So, you decide to open a long call calendar spread.
You sell a near-term call option (Call A) with a strike price of $100, collecting a premium of $2. At the same time, you buy a longer-term call option (Call B) with the same strike price, paying a premium of $5.
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2. Long Put Calendar Spread
- Overview
A long put calendar spread involves selling a near-term put (Put A) and buying a longer-term put (Put B) at the same strike price. Both options are on the same underlying asset. This strategy offers limited profit potential while also capping potential losses.
- Features
- Components
- Profit source
Underlying price | Source |
Rise | Selling Put A and reducing cost |
Fall | Put B value increase |
- Case study
Let’s imagine a made-up company called TECH.
Right now, TECH’s stock price is $100 per share. You think the stock will stay flat in the short term but gradually decline over the next few months. So, you decide to open a long put calendar spread.
You sell a near-term put option (Put A) at a strike price of $100, collecting a premium of $2. At the same time, you buy a longer-term put option (Put B) with the same strike price, paying a premium of $5.
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3. Short Call Calendar Spread
- Overview
A short call calendar spread involves buying a near-term call (Call A) and selling a longer-term call (Call B) at the same strike price. Both options are on the same underlying asset.
- Features
- Components
- Profit source
Underlying price | Source |
Rise | Call A value increase |
Fall | Selling Call B and reducing cost |
- Case study
Let's imagine a made-up company called TECH.
Right now, TECH’s stock price is $100 per share. You expect a sharp short-term move, so you decide to open a short call calendar spread.
You buy a near-term call option (Call A) at a strike price of $100, paying a premium of $2. At the same time, you sell a longer-term call option (Call B) with the same strike price, collecting a premium of $5.
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4. Short Put Calendar Spread
- Overview
A short put calendar spread involves buying a near-term put (Put A) and selling a longer-term put (Put B) at the same strike price. Both options are on the same underlying asset.
- Features
- Components
- Profit source
Underlying price | Source |
Rise | Selling Put B and reducing cost |
Fall | Put A value increase |
- Case study
Let's imagine a made-up company called TECH.
Right now, TECH’s stock price is $100 per share. You expect a sharp short-term move, so you decide to open a short put calendar spread.
You buy a near-term put option (Put A) at a strike price of $100, paying a premium of $2. At the same time, you sell a longer-term put option (Put B) with the same strike price, collecting a premium of $5.
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Risk Warning
On option expiration day, before market close (11:00–14:00 EST), Longbridge will dynamically calculate the buying power required to exercise in-the-money or near-the-money options and adjust margin requirements accordingly. If your account has insufficient buying power, a margin call will be issued, which may lead to forced liquidation. If you hold an options strategy, Longbridge may liquidate the entire strategy at once, including all option contracts and the corresponding stock positions. Please plan your funds and positions in advance.