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Short Call Calendar Spread
| Strategies |
Short Call Calendar Spread |
| Component |
Sell distant maturity call, buy nearby maturity call of the same strike price/level |
| Potential Profit |
Limited to net premium received |
| Maximum Loss |
- 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
|
| Time Value Impact |
Neutral |
| Remarks |
The features of Short Call Calendar Spread and Short Put Calendar Spread are quite similar. The major difference falls on the amount of net premium received, 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 |
Sell ABC Mar $200 Call, receive $30, and buy ABC Jan $200 Call, pay $20 |
| Net Premium |
Receive $30-$20=$10 |
| Profit when |
Stock price is further away from $200 on the nearby expiry date |
| Potential Profit |
$10
|
| Potential Loss |
Time decay (Jan call) - time decay (Mar call) |
| Time Value Impact |
Negative |
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