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Long Call Calendar Spread
| Strategies |
Long Call Calendar Spread |
| Component |
Buy distant maturity call, sell nearby maturity call of the same strike price/level |
| Potential Profit |
- When the stock price/index level is at the strike price/level on the nearby expiry date
- Limited to the time decay on the nearby call minus the time decay on the distant call
|
| Maximum Loss |
Limited to net premium paid
|
| Time Value Impact |
Positive |
| Remarks |
The features of Long Call Calendar Spread and Long Put Calendar Spread are quite similar. The major difference falls on the amount of net premium paid, depending on the strike price/level of the contracts chosen. Margin may be required. The short position might be assigned at any time before expiry. |
Example
| Component |
Buy ABC Mar $200 Call, pay $30, and sell ABC Jan $200 Call, receive $20 |
| Net Premium |
Pay $30-$20=$10 |
| Profit when |
Maximum when the stock price is $200 on the nearby expiry date |
| Potential Profit |
Time decay (Jan call) - time decay (Mar call) |
| Potential Loss |
$10 |
| Time Value Impact |
Positive |
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