Calendar Spread Bullish Bearish

15 expiring 1900 call option will generate around 4 155 in premium and buying the feb.

Calendar spread bullish bearish. Calendars iron condors and butterfly spreads provide examples with positive time decay for the bullish or bearish investor. A bearish calendar spread consists of two options. Or by changing to puts instead of calls and again by adjusting the strike prices you can create a bearish position.

One advantage of using the otm calendar spread is that it is less expensive than an atm. Ultimately utilizing this strategy is an effective way to minimize risk. Using calls the bull calendar spread strategy can be setup by buying long term slightly out of the money calls and simultaneously writing an equal number of near month calls of the same underlying security with the same strike price.

The options trader applying this strategy is bullish for the long term and is selling the near month calls with the the intention to ride the long term calls. Each of of these positions is theta positive so that as long as price stays within the profit range you will be paid by the option decay. Often traders will use leaps or options with expiration dates longer than a year.

Calendar spreads are useful in any market climate. You could experiment by shifting strike prices in a paper trade to be more neutral or bullish. A long put option and a short put.

You would deploy this strategy if you think the long term outlook for any particular underlying asset is bearish heading for a downturn. If your objective is to use calendar spreads for income then the good news is that calendar spread earnings tend to be higher than that of other debit or credit spreads. New spreads at strikes higher than the stock price are bullish bets and new spreads at strikes below the stock price are bearish bets.

The bear calendar spread strategy is the opposite of a bull calendar spread and consists of two options. Calendars iron condors and butterfly spreads provide examples with positive time decay for the bullish or bearish investor. With this trading strategy time decay is your friend.