Calendar Spread
Same strike, two expirations. Sell the near, buy the far. Theta arbitrage with a vega tilt.
Max profit
Maximised when the underlying pins the strike at the short leg expiration.
Max loss
Debit paid (rough; actual depends on IV behavior).
Breakeven
Two breakevens, one each side of the strike, derived from leg values at the short expiration.
Legs
Structure
Long 1 call (or put) at a far expiration + short 1 call (or put) at the same strike, near expiration.
When to use
Low IV, expectation of IV expansion, neutral directional view. Best around quiet periods before known catalysts.
Example
SPY at $450. Long 450 call 60 DTE $10, short 450 call 30 DTE $7. Debit $3. SPY pins at $450 in 30 days → ~$4 profit if IV cooperates.
Notes
- Net long vega: rising IV helps. Close at or before short-leg expiration to avoid unintended naked exposure.
Build it in the simulator
Open this structure in the app, adjust spot, IV, and DTE, and watch the payoff and Greeks move.
Get the app