Showing posts with the label calendar-spread-risk


THE OPTIONS COURSE CALENDAR SPREAD A calendar spread is a trade that can be used when the trader expects a  gradual or sideways move in the stock. Sometimes called the horizontal  spread, it uses two options with the same strike prices and different expi ration dates. It can be created with puts or calls. Generally, with the cal endar spread, the option strategist is buying a longer-term option and  selling a shorter-term option.  Unlike the vertical spreads like bull call  spreads, bear put spreads, and other trades that are directional in nature  (i.e., they require the shares to move higher or lower), calendar spreads  can be created when the strategist is neutral on the shares. Basically, in a  neutral calendar spread, the trader wants the short-term option to decay  at a faster rate than the long-term option. However, strategists can also  create both bullish and bearish calendar spreads depending on their out look for the shares. Calendar Spread Mechanics