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Options Strategies
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Long Put Calendar Spread
| Strategies |
Long Put Calendar Spread |
| Component |
Buy distant maturity put, sell nearby maturity put 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 put minus the time decay on the distant put
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| 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 Put, pay $30, and sell ABC Jan $200 Put, 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 put) - time decay (Mar put) |
| Potential Loss |
$10 |
| Time Value Impact |
Positive |
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