§ 01
| Spread Type | Structure | Profits From | Risk |
|---|---|---|---|
| Calendar (same strike) | Sell near-term, buy far-term (same strike) | Theta differential + stable IV | Stock moves far from strike |
| Diagonal (diff strike) | Sell near-term OTM, buy far-term at different strike | Theta + moderate directional move | Large adverse move + IV collapse |
§ 02
Calendar spreads benefit from rising IV (long option’s vega > short option’s vega). This makes them particularly attractive before anticipated volatility events when you want to be long vega.
§ 03
Compare the theta of a 30-day ATM option vs. a 90-day ATM option on the same stock. The 30-day decays faster — that’s the edge you’re capturing with a calendar spread.
§ 04
You set up a calendar spread (sell 30-day, buy 90-day) and the stock barely moves. Is this good or bad?
§ 05
§ 06
Calendar spread: sell 30-day ATM call + buy 60-day ATM call, same strike. Profits when?
Five questions · AI feedback
Sit with the ideas.
You buy a 90-day $100 call for $7 and sell a 30-day $100 call for $3.50. Net cost is $3.50. In 30 days (short call expiration), the stock is at $100. The 60-day $100 call is now worth $5.50. What is your P&L?
Why: