Calendar spread (options)
An options calendar spread sells a short-dated option and buys a longer-dated option of the same type and strike. It profits from the faster time decay of the near option when the underlying stays near the strike, and from a rise in the longer expiry's implied volatility relative to the shorter one.
Senzoukria · Glossary · Updated September 2026
At a glance
- Construction
- Short near-expiry option, long far-expiry option, same strike and type
- Greeks at the money
- Long vega, short gamma, positive theta
- Key driver
- Forward volatility between the two expiries
Worked example
Underlying at 100, 20% implied volatility on both expiries, zero rates. Sell the 7-day 100 call for 1.10 and buy the 30-day 100 call for 2.29: the calendar costs 1.18. When the short call expires, if the underlying is still at 100 and implied volatility unchanged, the long call, now with 23 days left, is worth 2.00, a gain of 0.82. If the underlying is at 105, the short call costs 5 at expiry and the long call is worth 5.45, leaving 0.45, a loss of 0.73; at 95 the long call is worth 0.39, a loss of 0.79.
| Underlying | Long call (23 days) | Short call payoff | Spread value | P&L |
|---|---|---|---|---|
| 95 | 0.39 | 0 | 0.39 | −0.79 |
| 100 | 2.00 | 0 | 2.00 | +0.82 |
| 105 | 5.45 | −5.00 | 0.45 | −0.73 |
Greeks
At inception, the example spread has a vega of +0.059 per volatility point, because the longer option carries more vega, a gamma of −0.074, because the shorter option carries more gamma, and a theta of +0.041 per day, because the shorter option decays faster. It wants the underlying to stay put and implied volatility, especially on the back month, to rise.
Calendars and forward volatility
- Being long the far expiry and short the near one is, to first order, a long position in the forward volatility between the two dates.
- A term structure that is inverted, near above far, makes calendars cheap in volatility terms but signals near-term stress.
- A scheduled event between the two expiries raises the long leg's implied volatility; after the event, the crush affects the long leg, hurting the position.
- Different expiries can have different skews, so calendars on out-of-the-money strikes also carry a view on how the smile changes by maturity.
In Senzoukria
Senzoukria does not price spreads. The IV term structure panel of its GEX module shows the at-the-money implied volatility of each expiry and classifies the curve as contango, inverted, flat or humped, the information a calendar trader reads first. On the tape, a calendar prints as two legs of the same strike and different expiries; Option Flow's MULTI tag can group them when they are the same size and print within 25 milliseconds, but its contract window only covers the two nearest expirations.
Related
- Forward volatility
- Volatility term structure
- Volatility crush
- Volatility: smile, term structure and skew
In the same section
- Call wall
- Calendar spread
- Calmar ratio
- CAGR
- Cancel on disconnect
- Buying and selling pressure
- Cash settlement
- Buy-side and sell-side liquidity
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Frequently asked questions
- Why is a calendar spread long vega if both legs are the same strike?
- Because vega grows with time to expiry. The long, far-dated option has more vega than the short, near-dated one, so a parallel rise in implied volatility increases the long leg's value more than the short leg's.
- What is the main risk of a long calendar?
- A large move away from the strike before the short leg expires, which turns both legs into low-extrinsic options and collapses the spread's value, and a fall in the far expiry's implied volatility, for example after an event.