Call calendar spread: sell the near month’s time, keep the far month’s
See whether time helps or hurts at each price on every day until the near expiration, and why the “P&L at expiration” chart depends on the far month’s IV.
All figures are Black-Scholes model estimates, not market quotes or guarantees.
US stock and ETF options are American-style and can be exercised at any time. This model treats every option as European and does not model early exercise or assignment.
P&L by price and day (model estimate, current price 100, IV 30%, 30 days)
| Underlying price | Day 0 | Day 7.5 | Day 15 | Day 22.5 | Day 27 | Day 30 |
|---|---|---|---|---|---|---|
| 90 | −$69 | −$72 | −$78 | −$90 | −$102 | −$111 |
| 95 | −$23 | −$15 | −$5 | +$5 | +$5 | −$7 |
| 100 | $0 | +$15 | +$36 | +$70 | +$110 | +$201 |
| 105 | −$9 | +$1 | +$14 | +$28 | +$32 | +$22 |
| 110 | −$39 | −$38 | −$39 | −$48 | −$60 | −$69 |
Structure: one strike, two expirations
A call calendar spread has two legs with the same strike of 100: you sell a call that expires in 30 days and buy a call that expires in 60 days. Every number on this page assumes a current price of $100, implied volatility (IV) of 30% on both legs, a 4% risk-free rate, no dividends, and one contract per leg.
The near call brings in $3.59 a share and the far call costs $5.17, for a net debit of $157.72. Barring early assignment, that is the most the spread can lose.
The far call covers the near one, but some brokers require a higher options approval level for calendar spreads. At entry, Delta is +1.34, Theta is +$1.69 a day (instantaneous), and Vega is +$4.67 per point of IV: at the start, time works for you, and so would a rise in IV.
Why the P&L at the near expiration is a model estimate
The Lab’s time axis stops at the nearest expiration, day 30. After that, only the far call is left, which is a different position. On day 30, the near call is worth its intrinsic value, while the far call still has 30 days to run and is valued by the model, using the far leg’s IV.
So the “P&L at expiration” curve is not a fixed line: it depends on what the far call’s IV is on that day. With IV unchanged, max profit is $201.39 at $100 and the breakevens are $95.22 and $105.91. Because both legs start at the same IV, the far call on day 30 (30 days left, at the money) is worth exactly what the near call sold for, $3.59. Max profit is that $3.59 less the $1.58 net debit per share, times 100.
Far from the strike, the loss approaches the $157.72 debit on the downside. On the upside the model shows about −$124.90, because a deep in-the-money far call still holds the interest on the strike for its last 30 days. In practice, a short call that far in the money can also be assigned early.
Time profile: $100 keeps rising, $95 and $105 rise then fall
- At $100, the strike, the gain builds slowly and then fast: +$36 by day 15, +$70 by day 22.5, +$110 by day 27, +$201 on day 30. 65% of it arrives in the last 7.5 days.
- At $95, the P&L rises from −$23 to +$5 between day 22.5 and day 27, then falls back to −$7. It is positive only from day 18.5 to day 28.6.
- At $105, it rises from −$9 to +$32 on day 27, then falls back to +$22.
- At $90 and $110, time costs money throughout: −$69 to −$111 and −$39 to −$69.
The turn at $95 and $105 happens because, in the last few days, the near call’s time value off the strike is almost gone, while the far call keeps losing time value at its normal pace.
The narrowing “time helps” range
The range where the next-day change is positive surrounds the strike and keeps narrowing: $90.79 to $111.18 on day 0, $92.81 to $108.36 on day 15, $94.37 to $106.34 on day 22.5, and $97.84 to $102.32 with 1 day left.
Unlike the iron condor, whose range stops at the midpoints of its wings, the calendar’s range keeps closing in on the strike. The near call’s decay is concentrated more and more tightly around the 100 strike as expiration approaches.
Far-month IV: what a 5-point change does
At the near expiration, the near call is just intrinsic value, so only the far call’s IV matters. Here is the P&L on day 30 for three far-month IV levels, 5 percentage points (pp) apart:
| Far-month IV | At $90 | At $95 | At $100 | At $105 | At $110 | Max profit | Breakevens |
|---|---|---|---|---|---|---|---|
| 25% (−5 pp) | −$134 | −$53 | +$144 | −$25 | −$96 | $144.40 | $96.73 and $103.98 |
| 30% (unchanged) | −$111 | −$7 | +$201 | +$22 | −$69 | $201.39 | $95.22 and $105.91 |
| 35% (+5 pp) | −$81 | +$42 | +$258 | +$72 | −$34 | $258.39 | $93.64 and $108.01 |
On day 0, the same 5-point shift moves the P&L at $100 by $23.34 either way, about 14 days of the entry Theta.
Try it in the Lab: three experiments
Drag the day slider from day 22.5 to day 30 (the link opens on day 30) and watch the $95 and $105 lines turn down, to −$7 and +$22 at the near expiration.
Open in the LabOn day 30, apply an IV shift. The link uses +5 pp, where max profit is $258; set it to −5 pp and it drops to $144.
Open in the LabOpen the time-effect map and watch the positive zone narrow into a band around the strike: $97.84 to $102.32 on the last day before the near expiration (the cursor is on day 29).
Open in the Lab
Three common misconceptions
MisconceptionA calendar spread’s P&L at expiration is fixed.
What the numbers showAt the near expiration, a 5-point change in far-month IV either way moves max profit between $144 and $258, and the profit zone from $96.73–$103.98 (at −5 pp) to $93.64–$108.01 (at +5 pp).
MisconceptionPositive Theta means time is always helping.
What the numbers showOnly inside a narrowing range. At $95 the position shows +$5 from day 22.5 to day 27 and −$7 at the near expiration; at $105 it shows +$32 on day 27 and +$22 at the near expiration.
MisconceptionA calendar spread only earns time and doesn’t mind price moves.
What the numbers showAt the near expiration, the profit zone is only $95.22 to $105.91. A 5% move cuts the profit from +$201 to +$22 at $105, or to −$7 at $95.