Chapter 9: Calendar Spreads 199 
If the underlying stock moves substantially up or down in the first 3 months, the 
spreader could realize a larger dollar loss with the October/ April spread because his 
loss will approach the initial debit. 
The remaining combination of the expiration series is to initially buy the 
longest-term call and sell the intermediate-term call against it. This combination will 
generally require the smallest initial debit, but there is not much profit potential in 
the spread until the intermediate-term expiration date draws near. Thus, there is a 
lot of time for the underlying stock to move some distance away from the initial strik­
ing price. For this reason, this is generally an inferior approach to calendar spread­
ing. 
SUMMARY 
Calendar spreading is a low-dollar-cost strategy that is a nonaggressive approach, pro­
vided that the spreader does not invest a large percentage of his trading capital in the 
strategy, and provided that he does not attempt to "leg" into or out of the spreads. 
The neutral calendar spread is one in which the strategist is mainly selling time; he 
is attempting to capitalize on the known fact that the near-term call will lose time pre­
mium more rapidly than will a longer-term call. A more aggressive approach is the 
bullish calendar spread, in which the speculator is essentially trying to reduce the net 
cost of a longer-term call by the amount of credits taken in from the sale of a nearer­
term call. This bullish strategy requires that the near-term call expire worthless and 
then that the underlying stock rise in price. In either strategy, the most common 
approach is to sell the nearest-term call and buy the intermediate-term call. 
However, it may sometimes prove advantageous to sell the near-term and buy the 
longest-term initially, with the intention of letting the near-term expire and then pos­
sibly writing against the longer-term call a second time.