   11: The Calendar Spread Strategy Strategy: Calendar spread A calendar spread is a spread where you buy and sell an equal number of call or put options, for the same stock and the same strike price, but with a different expiry date. Calendar spreads can be either bullish or bearish; for a credit or a debit; and use either calls or puts. The important thing to recognize is that you are both buying AND selling the same type of option (call or put), at the same strike price, but with a different expiry date. Notice the more complex profit loss pattern in the graph below. Because the two options used in this spread have different expiry dates, the long call does not increase in value as quickly as the short call decreases in value as the stock rises, so you can lose money if the stock goes to far in either direction. This is due to a thing called "delta". Delta is the amount an option's price will change in relation to the change in the underlying stock's price. In this example, the long JAN 2002 CALL starts off with a delta of 62 - it will gain 62 cents for each 1 dollar XYZ stock increases. The short JAN 2001 CALL has a delta of -52, so it will lose 52 cents for each dollar XYZ stock increases. As the JAN 2001 CALL approaches its expiry date, its delta goes towards -100, while the long JAN 2002 CALL still keeps its delta around 65 or so.  Figure 1: Jan 2001/Jan 2002 $60 CALL Calendar Spread on XYZ Example:
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