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+198 Part II: Call Option Strategies 
+the fact that all the losses will be small and the infrequent large profits will be able 
+to overcome these small losses, one should do nothing to jeopardize the strategy and 
+possibly generate a large loss. 
+The only reasonable sort of follow-up action that the bullish calendar spreader 
+can take in advance of expiration is to close the spread if the underlying stock has 
+moved up in price and the spread has widened to become profitable. This might 
+occur if the stock moves up to the striking price after some time has passed. In the 
+example above, if XYZ moved up to 50 with a month or so of life left in the April 50 
+call, the call might be selling for I½ while the July 50 call might be selling for 3 
+points. Thus, the spread could be closed at I½ points, representing a I-point gain 
+over the initial debit of 1/2 point. Two commissions would have to be paid to close 
+the spread, of course, but there would still be a net profit in the spread. 
+USING ALL THREE EXPIRATION SERIES 
+In either the neutral calendar spread or the bullish calendar spread, the investor has 
+three choices of which months to use. He could sell the nearest-term call and buy the 
+intermediate-term call. This is usually the most common way to set up these spreads. 
+However, there is no rule that prevents him from selling the intermediate-term and 
+buying the longest-term, or possibly selling the near-term and buying the long-term. 
+Any of these situations would still be calendar spreads. 
+Some proponents of calendar spreads prefer initially to sell the near-term and 
+buy the long-term call. Then, if the near-term call expires worthless, they have an 
+opportunity to sell the intermediate-term call if they so desire. 
+Example: An investor establishes a calendar spread by selling the April 50 call and 
+buying the October 50 call. The April call would have less than 3 months remaining 
+and the October call would be the long-term call. At April expiration, if XYZ is below 
+50, the April call will expire worthless. At that time, the July 50 call could be sold 
+against the October 50 that is held long, thereby creating another calendar spread 
+with no additional commission cost on the long side. 
+The advantage of this type of strategy is that it is possible for the two sales (April 
+50 and July 50 in this example) to actually bring in more credits than were spent for 
+the one purchase (October 50). Thus, the spreader might be able to create a position 
+in which he has a guaranteed profit. That is, if the sum of his transactions is actually 
+a credit, he cannot lose money in the spread (provided that he does not attempt to 
+"leg" out of the spread). The disadvantage of using the long-term call in the calendar 
+spread is that the initial debit is larger, and therefore more dollars are initially at risk.