Calendar spreads are often also referred to as time spreads or horizontal spreads?
1. True
2. False
Depending on who are you talking to they may use the phrase calendar spread, time spread, or horizontal spread. Make sure you understand these all mean the same thing.
If you’re buying the ABC March/May 80 strike-price calendar spread for $1.75, you would be?
1. Buying March for $2.75 and selling May for $1.00
2. Buying May for $2.75 and selling March for $1.00
3. Buying March for $.75 and buying May for $2.00
When buying a calendar spread, we sell the closer month and buy the further out month and the total will be a $1.75 debit. The only answer that works would be buying May for $2.75 and selling March for $1.00.
A good time to execute a long calendar call spread might be when?
1. We expect the stock is going to rise, but not quick enough to pass our short strike.
2. The expect the stock to trade sideways.
3. We expect the stock jump up to a new high in the near term.
When executing a long calendar call spread, we want the stock to trade up, but not over our near term short strike. After this option expires worthless, then we want to the stock to trade higher.
