Using calls, the calendar spread strategy can be setup by buying long term calls and simultaneously writing an equal number of near-month at-the-money or slightly out-of-the-money calls of the same underlying security with the same strike price
Calendar spreads, also known as time spreads, are extremely versatile strategies and can be used to take advantage of a number of scenarios while minimizing risk. A calendar spread consists of buying or selling a call or put of one expiration and doing the opposite in a later expiration. More often than not, this involves buying or selling an option in the front month (the expiration closest to the current date) and selling or buying an option of the same strike either the next month or a few months out. They can also be done using weeklies instead, especially around events. Call or put calendar spreads look alike on a graph of profit and loss.
