Glossary

Calendar Spread

By Rohan Fernandes, Founder · Updated 2026-08-22 · Educational reference, not investment advice

A calendar spread sells a near-dated option and buys a longer-dated one at the same strike for a net debit, profiting when the near leg decays faster than the far leg loses value. It is the direct trade on the volatility term structure.

Maximum loss is the debit paid; the position wants the stock near the strike and near-dated volatility rich relative to far-dated. Earnings create its classic setup, selling the event-inflated front expiration against a calm back one. The full treatment is in the calendar article.

Related reading: Calendar Spreads: Trading the Volatility Term Structure · Volatility Term Structure · IV Crush

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