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Long calendar spreads (a.k.a. ‘time spreads’ or ‘horizontal spreads’) can be very confusing to understand at first. In this video, you’ll learn exactly how long calendar spreads profit by seeing P/L visualizations of historical calendar spread components.
The long calendar spread is constructed by selling an option and buying another option of the same type and strike price but in different expiration cycles.
When traders buy calendar spreads, they’re anticipating the stock price to stay near the spread’s strike price as time passes. If that happens, the spread’s price will increase, but why?
In this video, you’ll learn exactly why long calendar spreads profit when the stock price hovers around the strike price as time passes.
Why Calendar Spreads Are NOT Long Volatility Trades:
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