Calendar Spread Options Explained
Calendar spread options explained. Learn long calendar spread setup, term structure, IV effects, earnings risk, and how traders compare expirations.
Frequently asked questions
Is a calendar spread bullish or bearish?
It can be neutral or have a mild directional lean depending on whether you build it with calls or puts and where you place the strike. The structure is often more about time and volatility than outright direction.
Why do traders compare calendar spreads with expected move?
Because a calendar often works best when price stays relatively close to the strike through the short expiration. Expected move helps frame whether the market is already pricing a larger move than your structure prefers.
Can IV crush hurt a calendar spread?
Yes. Front-month volatility collapsing can help the short leg, but the long back-month option can also lose value. The net effect depends on how both expirations reprice together.
What should I scan before entering a calendar spread?
Check liquidity in both expirations, open interest, bid-ask spreads, the distance to your strike, and whether term structure or event risk supports the setup you want to trade.