Chapter 35: Futures Option Strategies for Futures Spreads 705 
there is a major difference between the futures option calendar spread and the stock 
option calendar spread. That difference is that a calendar spread using futures 
options involves two separate underlying instruments, while a calendar spread using 
stock options does not. When one buys the May soybean 600 call and sells the March 
soybean 600 call, he is buying a call on the May soybean futures contract and selling 
a call on the March soybean futures contract. Thus, the futures option calendar 
spread involves two separate, but related, underlying futures contracts. However, if 
one buys the IBM May 100 call and sells the IBM March 100 call, both calls are on 
the same underlying instrument, IBM. This is a major difference between the two 
strategies, although both are called "calendar spreads." 
To the stock option trader who is used to visualizing calendar spreads, the 
futures option variety may confound him at first. For example, a stock option trader 
may conclude that if he can buy a four-month call for 5 points and sell a two-month 
call for 2 points, he has a good calendar spread possibility. Such an analysis is mean­
ingless with futures options. If one can buy the May soybean 600 call for 5 and sell 
the March soybean 600 call for 3, is that a good spread or not? It's impossible to tell, 
unless you know the relationship between May and March soybean futures contracts. 
Thus, in order to analyze the futures option calendar spread, one must not only ana­
lyze the options' relationship, but the two futures contracts' relationship as well. 
Simply stated, when one establishes a futures option calendar spread, he is not only 
spreading time, as he does with stock options, he is also spreading the relationship 
between the underlying futures. 
Example: A trader notices that near-term options in soybeans are relatively more 
expensive than longer-term options. He thinks a calendar spread might make sense, 
as he can sell the overpriced near-term calls and buy the relatively cheaper longer­
term calls. This is a good situation, considering the theoretical value of the options 
involved. He establishes the spread at the following prices: 
Soybean Trading 
Contract Initial Price Position 
March 600 call 14 Sell 1 
May 600 call 21 Buy 1 
March future 594 none 
May future 598 none 
The May/March 600 call calendar spread is established for 7 points debit. 
March expiration is two months away. At the current time, the May futures are trad­
ing at a 4-point premium to March futures. The spreader figures that if March