1. What it is
Sell a nearer-expiration option and buy a later-expiration option of the same type. Equal strikes make a calendar; different strikes make a diagonal.
2. Why use it
Trade the difference between near-term and longer-term option value.
3. How the numbers work
View example
- Sell 1 × Call · Strike 100 · Near expiration
- Buy 1 × Call · Strike 100 · Later expiration
- Option premium paid
- 3
At the first expiration, suppose the sold options expire worthless and the remaining options are worth 4：
- Position profit 4 − 3 = 1
The remaining value is an assumption, not a forecast. First-expiration maximum profit and breakevens depend on that value.
4. How it changes
The long calendar often has positive vega and positive theta near the strike, but both depend on price and each expiration's IV. The two maturities need not move together.
5. What to watch for
A conventional same-strike long calendar generally risks its debit if managed as a spread, but there is no single fixed first-expiration maximum profit or breakeven. Diagonals and assignment require separate analysis.
Do not set both legs' time value to zero at the first expiration. The later option is still alive; model its remaining time, IV and any resulting stock position.
Examples use illustrative entry prices and amounts per underlying unit, before costs. Contract amounts require the contract multiplier. Expiration payoffs assume the illustrated legs remain intact; earlier position values and exercise or assignment outcomes can differ.