make sure you are trading within the direction of the underlying trend of the stock. Conclusion In summary, it is important to remember that a long calendar spread is a neutral – and in some instances a directional – trading strategy that is used when a trader expects a gradual or sideways movement in the short term and has more direction bias over the life of the longer-dated option. This trade is constructed by selling a short-dated option and buying a longer-dated option, resulting in a net debit. This spread can be created with either calls or puts, and therefore can be a bullish or bearish strategy. The trader wants to see the short-dated option decay at a faster rate than the longer-dated option. When trading this strategy here are a few key points: Can be traded as either a bullish or bearish strategy Generates profit as time decays Risk is limited to the net debit Benefits from an increase in volatility If assigned, the trader loses the time value left in the position Provides additional leverage in order to make excess returns Losses are limited if the stock price moves dramatically References Options (finance) Derivatives (finance)