Long Call Calendar Spread

Usage scenarios

When you expect the price of the target asset to rise steadily, you can buy a long call calendar spread.

How to build

Buying a long call calendar spread involves two options transactions:

• Selling recent month's subscription options

• Buy a long-month subscription option

The target assets, exercise price, and quantity of the two options are the same.

Strategy brief

The underlying logic for using this strategy has two layers:

The first is to predict the recent steady trend of target assets, and profit can be made by losing time value during the bullish period in recent months.

Second, it is expected that the target asset price will rise in the later stages, thereby making further profits through long-term options.

The ideal situation is that the target asset price is stable. After the option profit has taken profit or expired in recent months, the target asset price rises far beyond the exercise price until the one-month option closes or expires.

Since the premium for recent month options at the same exercise price should be lower than that of long-month options, when this strategy is established, there will be a net outflow of funds on the book.

When choosing the exercise price when opening a position, the strategy can refer to such criteria:

In a relatively stable market, choose flat value options; in a bull market, choose imaginary options; in a bear market, choose real options.

After the recent month's options expire, you can choose to simultaneously close one-month options or open other options to form a new option strategy according to different market conditions.

Risks and benefits

Maximum profit: When the option expires in recent months, if the stock price is equal to the exercise price, the maximum potential profit that will be obtained by buying a long call calendar spread. The specific value depends on the price of the long month option and needs to be calculated according to the specific situation at that time, because the price of the long month option is determined by the degree of fluctuation.

Maximum loss: Option premium spent. When the stock price deviates significantly from the exercise price, the price of the two options will be infinitely close, and the biggest loss occurs at this point.

Break-even points: There are two break-even points, one above the exercise price and one below the exercise price. Since it also depends on the volatility of options, they need to be calculated according to actual conditions and are constantly changing.