Calendar spread
TradingDefinition
Sell a near-expiry option, buy a longer-dated option at the same strike. Profits from time decay (the near-dated option decays faster than the longer-dated). Best when the underlying stays flat.
Vega-positive (gains if implied vol rises). Theta-positive at the right entry. Used pre-earnings to bet on IV crush, or as low-cost long-dated directional plays.
Vega-positive (gains if implied vol rises). Theta-positive at the right entry. Used pre-earnings to bet on IV crush, or as low-cost long-dated directional plays.