Call Calendar Spread Strategy
Sell short-term call, buy longer-term call at same strike. Profit from time decay.
What is a Call Calendar Spread?
A Call Calendar Spread involves selling a short-dated call and buying a longer-dated call at the same strike. Profits from time decay (theta) on the short call. Best when stock stays near the strike. Limited risk to net debit.
When to Use a Call Calendar Spread
Use when expecting stock to stay near strike until short-term expiration. Best when short-term IV is high and long-term IV is low (IV skew trade).
Key Formulas
- Max Profit
- Varies (depends on IV and time)
- Max Loss
- Net debit × 100
- Breakeven
- Varies with IV
Example Trade
Sell weekly AAPL $200 Call, Buy monthly $200 Call. Net debit $1.50. Profit if AAPL pins $200 at weekly expiry.
Common Mistakes to Avoid
- Expecting big moves (hurts calendar)
- Not rolling short leg after expiration
- Mismatch between IV and stock direction
- Not considering ex-dividend dates
Related Strategies
Frequently Asked Questions
What is a Call Calendar Spread?
A Call Calendar Spread involves selling a short-dated call and buying a longer-dated call at the same strike. Profits from time decay (theta) on the short call. Best when stock stays near the strike. Limited risk to net debit.
When should I use a Call Calendar Spread?
Use when expecting stock to stay near strike until short-term expiration. Best when short-term IV is high and long-term IV is low (IV skew trade).
What is the maximum profit and loss for a Call Calendar Spread?
Max profit: Varies (depends on IV and time). Max loss: Net debit × 100.
What is the breakeven price for a Call Calendar Spread?
Breakeven: Varies with IV. Example trade: Sell weekly AAPL $200 Call, Buy monthly $200 Call. Net debit $1.50. Profit if AAPL pins $200 at weekly expiry.
What are common mistakes when trading a Call Calendar Spread?
Common mistakes include: Expecting big moves (hurts calendar); Not rolling short leg after expiration; Mismatch between IV and stock direction; Not considering ex-dividend dates.
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