Options Strategies
Short Put Calendar Spread
Strategies Short Put Calendar Spread
Component Sell distant maturity put, buy nearby maturity put of the same strike price/level
Potential Profit Limited to net premium received
Maximum Loss
  • When the stock price/index level is at the strike price/level on the nearby expiry date
  • Limited to the time decay on the nearby put minus the time decay on the distant put
Time Value Impact Negative
Remarks The features of Short Put Calendar Spread and Short Call Calendar Spread are quite similar. The major difference falls on the amount of net premium received, depending on the strike price/level of the contracts chosen. Margin may be required. The short position might be assigned at any time before expiry.
Example
  Net Position -1 Mar 200 Put +1 Jan 200 Put

Component Sell ABC Mar $200 Put, receive $30, and buy ABC Jan $200 Put, pay $20
Net Premium Receive $30-$20=$10
Profit when Stock price is further away from $200 on the nearby expiry date
Potential Profit $10
Potential Loss Time decay (Jan put) - time decay (Mar put)
Time Value Impact Negative

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