Strategy lab
Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.
2.19OptionsPayoffNeutral to bearish
Calendar put spread
The put version of the calendar spread: harvest the faster decay of the near-dated put.
Note. Profit is shown at the expiry of the short option.
Write positions with S (the underlying), call(strike, months) and put(strike, months). Strikes are fractions of today’s price; negative signs mean short.
Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.
- Source
- 151 Trading Strategies
- Section
- 2.19 · Options
- Asset class
- Options
- In the lab
- Payoff and monthly roll
Calendar put spread (2.19)
The put version of the calendar spread: harvest the faster decay of the near-dated put.
Key equation
Lab formula
put(1.00, 2) - put(1.00, 1)Profit is shown at the expiry of the short option.
How the option model works
Each leg is priced with Black–Scholes. For SPY the at-the-money volatility is 0.88 × the VIX, and a typical one-month S&P 500 skew makes out-of-the-money puts dearer and calls cheaper (0.9 volatility points per 1% of moneyness, flatter for longer expiries). Other underlyings use trailing realised volatility × 1.1 with no skew. The payoff chart shows profit at the first expiry and today. The roll backtest opens the structure at the close, marks it daily and reopens it at expiry. Bid–ask spreads are ignored, and they matter in practice.
More in Options
- 2.2 Covered call
- 2.3 Covered put
- 2.4 Protective put
- 2.5 Protective call
- 2.6 Bull call spread
- 2.7 Bull put spread
Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.