Two options, same strike, different expirations. This lesson shows how to get paid for time itself, and why the trade needs a quiet stock.
After this lesson you can
- Explain why a one-month option loses value faster than a three-month option at the same strike
- Work out a calendar's worst case, and why it can't lose more than what you paid
- See why the trade needs a quiet stock and implied volatility that doesn't fall
- Choose whether to close, roll, or keep the long call when the short call expires
- Recognise how it goes wrong, including the earnings trap
Chapters
- 0:00Getting paid for time
- 1:24Why near options melt faster
- 2:51The hump at expiration
- 4:35Halfway there
- 5:48The volatility bet
- 7:14Where the hump sits
- 8:29When the short call expires
- 9:39How it goes wrong
- 10:54Five mistakes
- 12:00The whole lesson on one screen
Practice in the game: Level 17 · The Sublessor