Calendar Spread

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

• 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.

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

• 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.

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

• 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.

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

• 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.