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Seasoned VeteransNeutral to Mildly Bearish
Calendar Spread (Puts)
Overview
Put version of the calendar spread. Sell a near-term put and buy a longer-term put at the same strike. Same mechanics as the call calendar but with put options. Benefits from time decay and rising implied volatility.
Max Profit
Variable — depends on time decay differential
Max Loss
Net premium paid
Breakeven
Approximately at the strike price
Structure
Short 1 near-term Put + Long 1 longer-term Put (same strike)
Risk Profile
Limited profit, limited risk. Profits from time decay differential between expirations.
When to Use
When you expect the stock to be near the strike at front-month expiration. When you're neutral to mildly bearish. Good when IV is relatively low and expected to rise.