Strategy - CALENDAR SPREAD (details below)

• bullish
• bearish
• neutral
  • expect prices to fluctuate in very narrow range
  • prices might flutuate in a broader range
  • moderately certain that prices will not flutuate much
  • short-term weakness but longer term rally
  • hold stock but expect no movement
• volatile

Strategy Implementation
Near dated call option is sold, and a longer-dated call option with the same strike is bought. [If the investor holds the opposite view, then a comparable strategy can be construced with puts].

Upside Potential
Large, if the bought option is held after the short option expires (the position then becomes a straight-forward buy call). If the position is closed at expiry of the near option, maximum profit will accrue if the market is at the level of the sold strike.

Breakeven Point at Expiry
Strike price plus premium

Downside Risk
Limited to the initial debit incurred for establishing the spread. .

Margin
Off-set may be available.

Comment
There is a risk of the sold options being called (i.e. being exercised).
Sometimes called a horizontal or time spread.