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+Because volatility has peaks and troughs, this can be a smart time to sell a
+calendar. The focus here is in seeing the “cheap” front month rise back up
+to normal levels, not so much in seeing the “expensive” back month fall.
+This trade is certainly not without risk. If the market doesn’t move, the
+negative theta of the short calendar leads to a slow, painful death for
+calendar sellers.
+Another scenario in which the back-month volatility can trade higher than
+the front is when the market expects higher movement after the expiration
+of the short-term option but before the expiration of the long-term option.
+Situations such as the expectation of the resolution of a lawsuit, a product
+announcement, or some other one-time event down the road are
+opportunities for the market to expect such movement. This strategy
+focuses on the back-month vol coming back down to normal levels, not on
+the front-month vol rising. This can be a more speculative situation for a
+volatility trade, and more can go wrong.
+The biggest volatility risk in selling a time spread is that what goes up can
+continue to go up. The volatility disparity here is created by hedgers and
+speculators favoring long-term options, hence pushing up the volatility, in
+anticipation of a big future stock move. As the likely date of the anticipated
+event draws near, more buyers can be attracted to the market, driving up IV
+even further. Realized volatility can remain low as investors and traders lie
+in wait. This scenario is doubly dangerous when volatility rises and the
+stock doesn’t move. A trader can lose on negative theta and lose on negative
+vega.