Neutral options strategy
Call calendar
Sell a near-term call and buy a later call at the same strike. Profits from the front option decaying faster.
NeutralLow IV (buying cheap premium)Defined riskLevel 5 · Advanced structures
Call calendar payoff
An example on a $100 stock with 30% implied volatility. The dashed line is the profit or loss at expiry; the solid line is what the position is worth today.
The trade
Sell 1 $100 call · 30 days · $3.59
Buy 1 $100 call · 60 days · $5.17
Net debit $158
Max profit$201
Max loss−$158
Break-evens$95.23 · $105.90
Chance of profit46%
How it works
- Max loss ≈ the debit.
- Best result: the stock sits at the strike when the front call expires.
- Gains if implied volatility rises (the long, later call has more vega).
When to use it
- You expect the stock to stay near a level for a few weeks, and IV is low.
Managing the trade
- Close before the front expiry; managing assignment on the short call is extra work.
Risks
- A big move either way; IV falling.