Two calendar spreads at once, one above the market and one below, giving a wider profit tent than a single calendar at the money.
A single calendar-spread peaks at one strike. Put one calendar at an out-of-the-money call strike and another at an out-of-the-money put strike and the payoff becomes a two-humped curve with a much broader profitable range.
Double calendars are long vega and positive theta, which is an unusual and attractive combination — until the front month explodes higher in volatility while the back month does not. They work best when volatility-term-structure is flat or inverted and you expect it to normalise.
Example: XYZ at $50. Sell the 30-day $47.50 put and $52.50 call, buy the 60-day $47.50 put and $52.50 call, for a $1.40 net debit. You profit if XYZ stays roughly between $46 and $54 through the front expiration, and you profit more if implied volatility rises.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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