Question about calendar spreads assignment risk

T

trendisyourfriend

Hi everyone, I'm new to options trading. Someone at thetagang recommended trading calendar spreads because they're more "forgiving" in the sense that there is a wider profit range before the spread starts losing value.

I'm looking to trade the Dec 16th/Nov 18th 272 calendar put spread for the QQQ.

My question: If the stock closes below 272, will the long put that's in the money cover any loss incurred from assignment of the short put?

Thanks
 
What am I missing? If you get two options with distinct expirations, price can literally go down and then up and you lose money (or higher then lower). Do the profit when price stays put and then goes your direction, or goes in each direction you need proceedingly?
 
2rosy said:
calendar spread. short front/long back has simialr pnl profile to short straddle
More...
Hmm. an important difference is this: a (long) calendar spread is, as the name also says, a spread, the short straddle is not a spread.
The net effect is: with spreads the loss is capped, not so with the short straddle.
Therefore the PnL profile differs substantially at the edges.

Other related info:
short calendar spread: https://www.fidelity.com/learning-c...ons-strategy-guide/short-calendar-spread-puts
 
Last edited:
taowave said:
Does not compute..

Long Calenders are long vol...
More...

Thanks for the reply taowave.

If the stock closes below 272, will the long put that's in the money cover any loss incurred from assignment of the short put? Both the long and short put have a strike of 272.

Does the long put need a higher strike price in order for me to profitably exercise it if the short put gets assigned (similar to a bear put spread)?

Thanks
 
Last edited:
purple line shows payoff on 11Nov
 

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