Name: Long Calendar Spread w/ Puts

Setup: Sell (short) Strike A put (front month) and Buy (long) Strike A put at a later month (back month)

Bias: Neutral

 

Break-Even: Due to the fact that it is played over two different expiration months determining an exact breakeven point is difficult

 

Max Profit: Limited – Credit received from short put minus the time decay lost on the long put

Max Loss: Limited – Debit paid

Margin: Since the trade is paid for no margin is required

Time Decay: Time decay is your friend in this play since it will speed up the decline of the short front month option faster than the back month option

Implied Volatility: Implied volatility’s effect is mixed in this case.  On one hand you want volatility to increase because it will drive up the price on the long back month option.  However, you do not want the stock to move a lot as this is a neutral play.

Notes: None at this time

Featured in Trade Review: None at this time