Calendar Spread

A calendar spread is an options strategy that involves simultaneously buying and selling two options of the same type and strike price but with different expiration dates. The goal is to profit from the difference in the rate of time decay between the two options.

Typically, the trader sells the option with the shorter tenor and buys the option with the longer tenor. Because the shorter-dated option experiences faster theta decay, the strategy aims to capture this difference as the near-term option loses value more rapidly than the long-term one.

This strategy is generally market-neutral and benefits from a period of relative price stability. In crypto markets, calendar spreads can be used to manage volatility exposure and generate yield.

The success of the strategy depends on the accuracy of the trader's forecast regarding the passage of time and volatility shifts. It requires careful monitoring of the Greeks, particularly theta and vega, to ensure the trade remains profitable.