spreadsMedium RiskNeutral
Calendar Spread
Sell a near-term option and buy a longer-term option at the same strike.
What is a Calendar Spread?
You sell a short-dated option and buy a longer-dated option at the same strike. You profit from the near-term option decaying faster than the longer-dated one. The ideal outcome is the stock being near the strike at the short option's expiration, then you can sell another near-term option.
When to use it
Best when IV is low (you want the back-month to be cheap) and you expect the stock to stay near the current price. Also used around earnings to profit from IV spike in the front month.
Structure
Sell 1 near-term option + buy 1 further-dated option at the same strike.
Key Metrics
Max Profit
Realized when stock is at the strike at front-month expiration. Varies by IV changes.
Max Loss
Net debit paid for the spread.
Breakeven
Depends on IV of both legs — evaluate with a P&L model.
Greeks Profile
Theta: positive (front month decays faster). Vega: positive (benefits from IV increase in back month). Delta: near zero if ATM.
Tips & Best Practices
- 1Sell the next expiration cycle and buy 2–3 months out.
- 2ATM calendars are pure theta/vega plays.
- 3IV expansion in the back month is your friend.
- 4Close before the front-month option expires — don't let it go to zero.
See it in action
Model a Calendar Spread with a real ticker. See the P&L chart, heatmap, and exact breakevens.
Open Calendar Spread Calculator →