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Seasoned VeteransNeutral to Mildly Bullish
Calendar Spread (Calls)
Overview
Also called a 'time spread' or 'horizontal spread'. You sell a near-term call and buy a longer-term call at the same strike. Profits from the front-month option decaying faster than the back-month. Benefits from rising IV.
Max Profit
Variable — depends on time decay differential
Max Loss
Net premium paid
Breakeven
Approximately at the strike price
Structure
Short 1 near-term Call + Long 1 longer-term Call (same strike)
Risk Profile
Limited profit, limited risk. Profits from time decay. Vega positive (benefits from rising IV).
When to Use
When you expect the stock to stay near the strike price in the near term. When you expect IV to rise. When you want to exploit time decay differentials.