Reverse Calendar Spread

AAA

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.

RELATED TERMS
  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. Futures

    A financial contract obligating the buyer to purchase an asset ...
  6. Strike Price

    The price at which a specific derivative contract can be exercised. ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Options & Futures

    Practical And Affordable Hedging Strategies

    Learn how to find and use the most cost-effective ways to transfer risk.
  2. Options & Futures

    Pencil In Profits In Any Market With A Calendar Spread

    This options spread strategy provides many advantages over plain old puts and calls.
  3. Options & Futures

    Trading Calendar Spreads In Grain Markets

    Futures investors flock to spreads because they hold true to fundamental market factors.
  4. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  5. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.
  6. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  7. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  8. Brokers

    OptionsXpress Vs. OptionsHouse: Which One To Pick?

    OptionsXpress and OptionsBroker -- each offers a price mix and set of services suitable for certain investors based on their trade approach and priorities.
  9. Options & Futures

    The Future Is Now: All About Futures ETFs

    A new security class - futures ETFs - is gaining popularity. We tell you how futures ETFs work and offer tips.
  10. Trading Strategies

    How To Arbitrage Precious Metals

    Here are the fine points, trading tips, suitable securities, and examples for precious metal arbitrage trading.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center