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.

BREAKING DOWN '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.

  1. Far Option

    The option with the longer time to expiration in a calendar option ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Position

    The amount of a security either owned (which constitutes a long ...
  5. Strike Price

    The price at which a specific derivative contract can be exercised. ...
  6. Futures

    A financial contract obligating the buyer to purchase an asset ...
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