When market conditions crumble, options become a valuable tool to investors. While many investors tremble at the mention of the word “options”, there are many option strategies that can be used to help reduce the risk of market volatility. In this article we are going to examine the many uses of the calendar spread, and discuss how to make this strategy work during any market climate.
Getting Started Calendar spreads are a great way to combine the advantages of spreads and directional option trades in the same position. Depending on how you implement this strategy, you can have either:
a market-neutral position that you can roll out a few times to pay the cost of the spread while taking advantage of time decay
or, a short-term market-neutral position with a longer-term directional bias that is equipped with unlimited gain potential
Either way, the trade can provide many advantages that a plain old call or put cannot provide on its own.
Long Calendar Spreads A...
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