Strategy Overview
Medium RiskAdvancedNeutral
A calendar spread involves selling a near-term option and buying a longer-term option at the same strike. You profit from time decay and potential IV increase.
Max Profit
Variable - depends on IV and time
Max Loss
Net debit paid
Breakeven
Varies with IV changes
Probability
~50% win rate
hist. est.
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Example Setup Calculator
$
Debit Paid
$200
Max Profit
$300
Max Loss
$200
Breakeven
$102.00
Strategy Components
SELL ATM CALL
Sell near-term ATM option
BUY ATM CALL
Buy longer-term ATM option
When to Use
- You expect the stock to stay near current price
- You expect IV to increase
- You want to profit from time decay
- You have a specific price target short-term
Best Market Conditions
- Low near-term IV
- Expected IV increase
- Range-bound short-term
Best Practices
- Front month should be 30-45 DTE or less
- Back month 2-3 months out
- Close before front expiration
- Watch for IV changes between months
Ready to Trade?
Review Calendar Spread and practice it in paper trading with the school workflow.
Paper Trading