neutralPays debit

Put Calendar Spread

A put calendar sells a near-dated put and buys a longer-dated put at the same strike. Like its call twin, it profits from the front option's faster decay — with a mild bearish tilt when struck below the stock price.

When it makes sense

You expect the stock to drift toward (not through) the strike by the front expiry
Front-month IV is elevated versus the back month — earnings in the front month is the classic setup
You want defined-risk short-term income with longer-term downside exposure kept on

How it works

Sell a put expiring soon, buy a put at the same strike expiring later, for a net debit. Value peaks at the front expiration with the stock right at the strike. After the front leg expires or is closed, the remaining long put can be held or rolled.

Risk & reward

Maximum loss: the net debit. The profit tent is centered on the strike; a crash through it early is the worst case short of maximum, since both puts go deep in the money and their values converge. Positive theta, positive vega.

Worked example

Stock at $150. Sell the 10-day $145 put, buy the 38-day $145 put, for a $1.10 debit ($110). Stock at $146 at the front expiry: short expires worthless, the long put holds ~$2.40 of value — about a $130 profit.

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