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calendar spread
(redirected from Calendar spreads)

   Also found in: Wikipedia 0.04 sec.
Calendar Spread
An options or futures spread established by simultaneously entering a long and short position on the same underlying asset but with different delivery months. Sometimes referred to as an inter-delivery, time or horizontal spread.

Notes:
An example of a calendar spread would be going long on a crude oil futures contract with delivery next month and going short on a crude oil futures contract whose delivery is in six months.


Calendar spread
Applies to derivative products. A strategy in which there is a simultaneous purchase and sale of options of the same class at the same strike prices, but with different expiration date.

calendar spread
In options and futures trading, the purchase of one contract and the sale of another contract that differs from the first only by its delivery or expiration date. An example of calendar spread would be the purchase of a December call with a strike price of $20 and the sale of a June call with the same strike price. An investor would use a calendar spread in order to profit from a change in the price difference as the securities move closer to maturity. Also called horizontal spread, time spread.

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The blow up resulted from specific large trades on North American gas calendar spreads, which have a tenuous relationship with macro economic factors such as the oil price - on a short term basis, gas and oil prices tend to be uncorrelated.
Calendar spreads can be beneficial even on stocks that are relatively inert, such as TWX.
These include butterfly, bull call and calendar spreads.
 
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