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Short Put Calendar Spread
| Strategies |
Short Put Calendar Spread |
| Component |
Sell distant maturity put, buy nearby maturity put 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 put minus the time decay on the distant put
|
| Time Value Impact |
Negative |
| Remarks |
The features of Short Put Calendar Spread and Short Call 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 Put, receive $30, and buy ABC Jan $200 Put, 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 put) - time decay (Mar put) |
| Time Value Impact |
Negative |
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