DEFINITION of 'Put Calendar'
An option strategy:
-Buy one put option contract with 90 days or more until expiration
-Sell one put option contract (at the same strike price) with 45 days or less until expiration
-In 45 days, sell another 45-day put option contract at the same strike price
-Hold the long position until expiration if it appears that market will be profitable. Otherwise, sell it.
INVESTOPEDIA EXPLAINS 'Put Calendar'
Profits can be realized since the price decay of the 45-day contract declines at a faster rate than the long option. The difference in premium decays allows investors to make money on the spread. The inherent risk in this strategy arises if prices rise in the short term and then increase thereafter.
An agreement that gives an investor the right (but not the obligation) ...
A bond that can be redeemed by the issuer prior to its maturity. ...
An option that can only be exercised at the end of its life, ...
An option whose payoff depends on the average price of the underlying ...
A financial derivative that represents a contract sold by one ...
An option contract giving the owner the right, but not the obligation, ...