A Calendar spread is when you sell an option and buy another one with a more distant expiration date. This can be created with either puts or calls.
For example, let’s say you wanted to play Netflix with calendar spread because you figure that the stock has dropped too far too quickly and will bounce soon but, longer term it should continue to drop.
This is how you would structure the trade:
SELL TO OPEN NFLX JUL 15th 180.00 PUT
BUY TO OPEN DEC 16th 180.00 PUT
This trade will allow you to benefit from the immediate expected bounce in the stock and set you up to take advantage of the longer term down turn.
