Calendar¶

Calendar spreads involve same type options (calls or puts) at the same strike price but with different expiration dates. As with other spreads, the calendar spread involves a long option and a short option. The most common structure for a calendar spread is the have the near-month spread be the short option and the out-month option be the long option. The result of this trade is a net debit. The aim of the spread is to gain enough premium in rolling the short option to the next month that the cost of the initial trade is covered and a profit is realized.