Reverse Calendar Spread

Definition of 'Reverse Calendar Spread'


An options or futures spread established by purchasing a position in a nearby month and selling a position in a more distant month. The two positions must be purchased in the same underlying market and must have the same strike price. The goal of a reverse calendar spread is to capitalize on major price fluctuations.

Investopedia explains 'Reverse Calendar Spread'


A reverse calendar spread is most profitable when markets make a huge move in either direction. It is not commonly used by individual investors trading stock or index options because of the margin requirements; it is more common among institutional investors.

The opposite of this strategy is the calendar spread.



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