What is a put calendar spread?

A put calendar spread is a risk-defined options strategy with unlimited profit potential. Put calendar spreads are neutral to bullish short-term and slightly bearish long-term. To open a put calendar spread, sell-to-open (STO) a short put option and buy-to-open (BTO) a long put option at the same strike price but with a later expiration date.

Is a calendar spread a good option strategy?

Like any other option strategy, calendar spreads are not without risks. One of the main risks is that the price of the underlying asset may deviate too much from the strike price. As a result, the trader will not be able to benefit from the time decay of the short-term option.

What are the different types of long calendar spreads?

There are two types of long calendar spreads: call and put. There are inherent advantages to trading a put calendar over a call calendar, but both are readily acceptable trades. Whether a trader uses calls or puts depends on the sentiment of the underlying investment vehicle. If a trader is bullish, they would buy a calendar call spread.

How do I sell a calendar spread?

To sell a calendar spread, you need to have a trading account with an options broker. You can then select the desired options and execute the trade. What’s the Risk of Calendar Spreads? The downside risk of calendar spreads is restricted to the net cost of the spread.