When doing option trading, there are so many possibilities and combinations of options that we could buy and sell. A lot of these trades have some pretty exotic names. With a diagonal spread, we are buying and selling calls at the same time or buying and selling puts at the same time. The strike prices are different and the expirations are different. I am not going to use any examples that would require approval of level 5 which would be uncovered calls. This is not something that most brokers allow […]

The definition of a calendar spread is buying and selling calls or buying and selling puts at the same strike but different expirations. The strike price that you buy will have more time than the strike price that you sell. The reason for doing a calendar spread is to reduce the cost of the option that you buy. This type of trade takes advantage of time decay. The sold option is going to offset the cost of the option you buy, thus reducing your risk. The net amount of the […]