Calendar Spreads usually cost money to enter, i.e. they are debit trades. They have defined risk limited to the debit required to initiate the trade. Calendar Spreads can be implemented with either Calls or Puts. Neutral Calendar Spreads are non-directional trades
See the Profit & Loss diagram of the Calendar Spread at OptionCreator
XYZ is currently trading at 100
Short 1 x At The Money 100 Strike Call Option (30 days to expiry) for (-3)
Long 1 x At The Money 100 Strike Call Option (60 days to expiry) for 5
Net debit to enter trade: (-2)
XYZ remains at 100 at expiration of short option
Short 1 x 100 Strike Call Option (near month) is At The Money and has no Intrinsic Value, profit = 3
Long 1 x 100 Strike Call Option (far month) has an Extrinsic Value of 3.5, loss = 1.5
Net profit = 1.5
Featured Video View All
Trading an Options Calendar Spread for profit - complete how to.
Video on finding and implementing calendar spread trades using stock options from 'Uncle Bob's Money' options advisory service.
External LinksCalendar Spreads
Riskreversal.com article about Calendar Spreads.How we Trade Calendar Spreads
Article by Kim Klaiman of Steady Options with some advice and recommendations for trading calendar spreads.Why Calendar Spreads Are An Oxymoron
This article discusses the conflict between Calendar spreads being volatility-positive (long vega) but still needing to remain within a trading range, as with short volatility strategies like Iron Condors.Calendar Spread (TastyTrade.com)
Tasty Trade article about Calendar Spreads.How to trade a Calendar
Background and overview about how to trade calendar spreads.Long Call Calendar Spread (Call Horizontal)
OIC description of Calendar Spreads using Calls.Bull Calendar Spread
The Options Guide article on Bull Calendar Spreads.