Calendar Spread

Byivtrades

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.

Similar Posts

  • Option Sweep

    Byivtrades

    What is an Option Sweep? An option sweep is basically when a big trader breaks up a large order into small individual trades. This is usually done in order to get filled fast or to conceal a large order.  The common thinking is that a sweep usually means a big trader knows something and is…

  • Diagonal Spread

    Byivtrades

    This is when you sell an options contract and simultaneously buy one with a later expiration date and a higher or lower strike price. For example, if your sell to open the AAPL NOV 145.00 Call and then buy to open the AAPL DEC 150.00 Call , you have created a diagonal spread. See also:…

  • Automatic Exercise

    Byivtrades

    Options with intrinsic value, or in-the-money options, are automatically exercised at expiration so that option holders don’t inadvertently leave money on the table. Since June 2008 , all options that are a penny or more in-the-money at expiration are exercised at expiration.

  • Credit Spread

    Byivtrades

    This is a spread  where the premium received from selling part of the spread is greater than the premium paid for the other part of the spread. For instance, if you sold the AAPL 140.00 Calls @ 4.00 and bought the AAPL 142.00 Calls for 2.00 you have a credit of 2.00. See also Bear…

Leave a Reply