Strategies

Calendar Spreads

Calendar spreads combine two expirations at the same strike. The outcome depends not only on SPX direction, but also on how quickly the front option decays and how much time value remains in the back option.

Core idea

What is a calendar spread?

A pure calendar spread, also called a time spread or horizontal spread, combines options of the same type at the same strike but different expirations. The classic long calendar sells the nearer option and buys the longer-dated option.

Because the back option normally contains more time value, the long calendar is generally opened for a net debit. The thesis is that the front option decays faster when price remains near the strike, while the back option retains time value. Near the strike, the position is commonly positive theta and positive vega, although those Greeks change with price, time, and volatility.

Simple calendar spread on SPX

Assume SPX is trading near 7,675. A compact calendar can use 14 DTE for the short leg and 21 DTE for the long leg at the same strike.

Call calendar

  • Short 1x SPXW 7,675 Call with 14 DTE
  • Long 1x SPXW 7,675 Call with 21 DTE
  • Market thesis SPX should be as close as possible to 7,675 at the front expiration.

Put calendar

  • Short 1x SPXW 7,675 Put with 14 DTE
  • Long 1x SPXW 7,675 Put with 21 DTE
  • Market thesis The target zone is again centered around the common strike.

Call and put calendars at the same strike have a similar core profile. In practice, skew, interest rates, liquidity, and the IV term structure can create different prices and Greeks.

Typical expirations

There is no universally optimal DTE combination. The short leg is often selected around 7 to 30 DTE, while the long leg uses at least the next expiration. A 7-to-30-day gap is common. The 14/21 DTE example is deliberately compact and reacts more quickly to price, gamma, and short-term IV changes than a 30/60 DTE calendar.

Double calendar: 14/21 DTE SPX example

A double calendar combines a lower put calendar and an upper call calendar. It therefore consists of two calendar structures and four option legs in total. Placing both strikes around spot can create a wider target area at the front expiration.

  • Short 1x SPXW 7,600 Put with 14 DTE
  • Long 1x SPXW 7,600 Put with 21 DTE
  • Short 1x SPXW 7,750 Call with 14 DTE
  • Long 1x SPXW 7,750 Call with 21 DTE

The illustration shows the typical shape at the expiration of the 14-DTE short legs. It is intentionally schematic: the actual profit zone depends on the debit, skew, IV term structure, and remaining value of the 21-DTE long legs. Maximum profit and break-even points are therefore not as fixed as they are for a vertical spread.

Can a calendar spread be opened for a credit?

Yes, but that is normally a reverse calendar or short calendar. The near option is purchased and the longer-dated option at the same strike is sold. Because the back option contains more time value, the structure is generally opened for a credit.

  • Reverse call calendar Long 14-DTE call and short 21-DTE call at the same strike.
  • Reverse put calendar Long 14-DTE put and short 21-DTE put at the same strike.
  • Credit diagonal Different strikes and expirations; related, but not a pure calendar.

A reverse calendar is not merely a cheaper version. It is usually negative vega and negative theta around the strike. Once the front long option expires, a longer-dated short option remains. A clear exit or roll before the first expiration is therefore essential.