Put Calendar Spread Strategy
Sell short-term put, buy longer-term put at same strike. Profit from time decay.
What is a Put Calendar Spread?
A Put Calendar Spread mirrors the call calendar using puts. Sell short-dated put, buy longer-dated put at same strike. Profits from theta decay when stock stays near strike. Popular neutral-to-bearish bias strategy.
When to Use a Put Calendar Spread
Use when expecting stock to stay near strike short-term. Best at support levels or before expected sideways action.
Key Formulas
- Max Profit
- Varies (depends on IV and time)
- Max Loss
- Net debit × 100
- Breakeven
- Varies with IV
Example Trade
Sell weekly SPY $420 Put, Buy monthly $420 Put. Net debit $1.50. Profit if SPY pins $420 at weekly expiry.
Common Mistakes to Avoid
- Strong directional move breaks the trade
- Not rolling short after expiration
- Incorrect IV assumptions
- Ignoring event risk
Related Strategies
Frequently Asked Questions
What is a Put Calendar Spread?
A Put Calendar Spread mirrors the call calendar using puts. Sell short-dated put, buy longer-dated put at same strike. Profits from theta decay when stock stays near strike. Popular neutral-to-bearish bias strategy.
When should I use a Put Calendar Spread?
Use when expecting stock to stay near strike short-term. Best at support levels or before expected sideways action.
What is the maximum profit and loss for a Put Calendar Spread?
Max profit: Varies (depends on IV and time). Max loss: Net debit × 100.
What is the breakeven price for a Put Calendar Spread?
Breakeven: Varies with IV. Example trade: Sell weekly SPY $420 Put, Buy monthly $420 Put. Net debit $1.50. Profit if SPY pins $420 at weekly expiry.
What are common mistakes when trading a Put Calendar Spread?
Common mistakes include: Strong directional move breaks the trade; Not rolling short after expiration; Incorrect IV assumptions; Ignoring event risk.
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