Long Call Calendar Spread

A Long Call Calendar Spread involves buying a long-term call option and selling a short-term call option at the same strike price. It profits from time decay and minimal price movement in the short term.

• Ideal for neutral to slightly bullish conditions, where minimal price movement is expected in the short term.
• Buying the longer expiry ATM call ensures long-term exposure, while selling the shorter expiry ATM call generates premium income.
• Risk is limited to the net cost of the strategy, with profits maximized near the strike price at the short-term expiry.

Example:

• NIFTY trading at 18,000.
• Buy 18,000 Call (next month expiry) at ₹300 and sell 18,000 Call (current month expiry) at ₹150 (lot size = 50).
• Outcome:
  1. If NIFTY stays near 18,000 at short-term expiry:
• The short-term call expires worthless.
• Net profit = ₹7,500 (premium collected).
  1. If NIFTY rises to 18,400 at short-term expiry:
• Loss on the short-term call = ₹20,000.
• Gain on the long-term call = ₹20,000.
• Net profit = ₹0.
  1. If NIFTY falls significantly:
• Both options lose value, but the long-term call retains time value.
• Net loss = ₹7,500 (net premium).