Long Put Calendar Option Screener

Hi, and welcome to the Options Learning Center. I'm excited to discuss long put calendar spread and how to use Barchart to get the most out of the strategy.

What Is A Long Put Calendar Spread?

A long put calendar spread is an option strategy that involves selling a put option that expires near-term while simultaneously buying another put option with a longer expiration date on the same underlying asset and the same strike price. The trade results in a net debit to initiate the trade.

Long Put Calendar Spread Options Strategy

• Combines Two Put Options
• Sell Short-Term Put & Buy Long-Term Put
• Same Strike Price, Same Asset

The goal of a long put calendar is to profit from the difference in volatility of both options while relying on theta decay to render the short put worthless. Theta is an options Greek that tells us how much the options premium will lose each given day, all things being equal.

• Goal:Profit From Volatility Differences
• Theta Decay:Devalues Short Put Over Time
• Theta: Daily Decay Of The Option Premium

The strategy aims to profit from low volatility on the short option and increasing volatility on the long option.

By collecting a premium on the short put with the shorter expiration, it offsets the cost of the long put with the longer expiration. As a result, long put calendar spreads are much more capital efficient than buying a longer-dated put option alone.

• Short Put Premium: Offsets Long Put Cost
• Capital Efficiency: Higher Than Single Long-Dated Put
• Expiration Difference: Key to Spread Strategy

Traders often use long put calendar spreads when near-term historical volatility, or HV is low, with the expectation that implied volatility, or IV, will increase as the trade approaches the short put's expiration date. The logic is that the long put's premium increases with increased volatility.

• Optimal: Low Near-Term Historical Volatility
• Expectation: Implied Volatility Will Increase
• Logic: Long Put Gains Value With Higher Volatility

Long put calendar spreads can be at the money or out of the money, depending on your trading preferences and risk tolerance. Out-of-the-money calendar spreads are less risky, have lower starting costs, but offer a lower profit potential. On the other hand, at-the-money long put calendar spreads are more expensive and have higher potential profit but are more sensitive to vega.

• Strike Selection:At-the-Money or Out-of-the-Money
• OTM Spreads: Lower Risk, Cost, and Profit Potential
• ATM Spreads: Higher Cost, Profit, and Vega Sensitivity

Vega tells us how much the option premium might change with a 1% change in volatility - so this is an essential Options Greek to know when trading calendar spreads.

• Vega: Approx. Premium Change For 1% Volatility Shift
• Importance: Essential For Trading Calendars
• Impact: Higher Vega Increases Option Premium

The maximum profit of a long put calendar spread happens when the underlying asset's price trades exactly at the strike, at the time of the short put's expiration. If that happens, the short put expires worthless, while the long put becomes more valuable.

• Max Profit Point:Asset Price at Strike on Expiration
• Short Put Outcome:Expires Worthless at Expiration
• Long Put Outcome: Gains Value Near Strike Price

The net debit paid at the start of the trade is the strategy's maximum loss. This happens if the underlying asset trades significantly above or below the strike at expiration. The specific price for the maximum loss condition depends on the options premiums at the short put's expiration. The trade reaches its theoretical maximum loss when the short put's premium is equal to that of the long put's premium, which renders the entire spread worthless.

• Maximum Loss: Premium Paid for Long Put + Premium Received from Short Put

The breakeven prices of a long put calendar spread can be Found On The Upside And Downside and Vary Depending On The Value Of The Spread, which changes as time goes on. Breakeven prices are Also Affected By Implied Volatility, making it a challenge to predict since most of the trade's value is derived from extrinsic (and therefore, variable) value.

• Breakeven: Highly Variable Based on Spread Value and IV at Expiration

Trade Example

Long put calendar spreads are complex strategies, and figuring out the details for yourself might take a lot of time. Thankfully, Barchart's got you covered with its Option Screener feature. Let me show you how.

Screening The Market For Long Put Calendar Trades

To access the Long Put Calendar screener, go to Barchart.com, click on the Options tab, and then click on Long Put Calendar Screener.

Once you click on that, you'll be brought to the results page with a list of default trades. You can rearrange the results page from highest to lowest or vice versa according to any of the column headers you see here by just clicking on them.

Now, while the default results are an excellent starting point, you may want to further refine the search. So, to customize the results, you can click on Set Filters at the top of the results window, and you'll be brought to the Screener page.

Here, you'll find our default filters, and you can add and remove any, as you like. To add a filter, just click on the "add a filter" field and type in whatever you need. Let's say I want only large mega-caps in my results. So, I can type in Market cap here, hit add, then I'll click mega.

Other Filters include your options trading data like the Greeks, price changes, moneyness, days to expiration, and more. Plus, you also have access to filters for the underlying assets themselves, including technical and fundamental analysis information, trading prices, percent changes, dividend information, and more. Everything you need to fine-tune your trading experience is right here.

Let's change a few of the filter values.

I'll change the days to expiration or DTE of the first trade leg, which is the short put, to 60 days and below, then change the DTE for the second leg or long put to between 60 and 100 days.

And now, I'll click on See Results. The results are sorted by highest to lowest IV Skew by default. IV Skew is the difference between the short and long put's individual implied volatility. A positive IV skew is preferable, as that means the short-term option has higher implied volatility than the long-term option. This is ideal because the short put, which you are selling, will be priced higher than other short puts due to elevated IV, which means you pay less for the trade.

You can also have Barchart automatically screen the market for the same filters, and email you the results every day. To do that, hit the Save Screener button, give it a name, then select when you'd like to get the emails.

Let's take this trade here as an example:

According to the screener, you can trade a long put calendar spread on Nvidia, with the stock currently trading at $134.43. The strike price for both puts will be $130. The short put expires on March 7, which is 13 from the date of the screen, while the long put expires 83 days from now, on May 16. You'll get $5.10 for the short put and pay $11.35 for the long put, bringing the total net debit to $6.25.

Now, let's break this trade down.

Profit Scenario

Let's say, for example, that Nvidia trades at $130 on the expiration of the short put. That means the short put has no intrinsic or extrinsic value and will expire worthless. Meanwhile, the long put is also at the money and has time value. Traders will be willing to pay for it.

So, let's say that your long put is now worth $15. If you sell it to close out the trade, your profit works out to $875 per contract which is calculated by subtracting the initial net debit of $6.25 from the current premium of $15, resulting in an $8.75 per share profit, or $875 per contract.

Profit Calculation:($15 - $6.25) * 100 = $875 Per Contract

Loss Scenario

Now, let's see what might happen in a loss scenario. If Nvidia trades significantly above or below the strike price, the trade will hit its maximum loss. This is because the options premiums will become equal, and when that happens, the net premium of both options will become zero.

The maximum loss for the trade is limited to the net debit paid. However, the exact price where the maximum loss occurs depends on the premiums and implied volatility (IV). But, let's assume that the stock trades below the strike, say at a $100, before the expiration of the short put.

This means both options are deep in the money, and you'll want to close them out to avoid assignment on the short put.

Screening For Long Put Calendar Spreads For Specific Assets

Barchart also allows you to search for long call calendars for a specific asset. All you need to do is go to the the stock or asset's Price Overview page on Barchart.com. Once there, look for Horizontal Spreads. Then look for the Long Put Calendar tab. You can click on the dropdown to change the expiration dates or click the screen button to reach the option screener page for a more granular search.

Closing Your Positions Before Expiration

It is always a good idea to close your short positions if they are in the money, right before expiration. This is similar to using any strategy that requires writing or selling options. For the long put calendar spread, you have one active short position, the short put.

• Strategy Includes One Short Position
• ITM Option Will Be Exercised at Expiration

If that short put gets assigned, you will be obligated to buy 100 shares of the underlying asset for every contract you wrote. That likely means that you'll be paying more for the asset than it's currently worth, and closing that position at that time will lead to losses. If you don't want these shares, you can sell them back to the market, or, assign your long put position.

• Assignment Means Buying 100 Shares
• Adverse Market Conditions Could Lead to a Loss

Before assigning your long put, however, take a look at the long put premium as the long put may still have some extrinsic value baked in, so you might be better off selling it, than exercising it. It'll depend on how much time to expiry remains, and whether the trading fees cost more than the option premium.

• Sell Long Put to Capture If Time Value Remains

Pros and Cons of Long Put Calendar Spreads

Long put calendars have a limited risk profile, meaning you know what you're getting into before the trade starts. Trading a put calendar spread allows you to buy a long-term put at a discount, and it significantly benefits from time decay or theta, and volatility expansion, as the long put becomes more valuable when volatility rises. Lastly, it's a flexible strategy that allows you to roll, close, or turn your position into something else if the situation calls for it.

• Limited Risk
• Capital-Efficient Strategy
• Benefits From Theta and High Vega
• Flexibility

On the other hand, long put calendar spreads have a limited profit potential, especially compared with a long put alone. It also requires low volatility at the entry, as the higher the volatility is at the start, the more risky the trade is. It can also be difficult to achieve maximum profit, as you'll need to be precise with your forecasting. And finally, as with any trade that involves selling options, you are at risk of assignment.

• Limited Profit Potential
• Requires Low Volatility During Entry
• Dependent on High Volatility For Profit
• Complex Strategy
• Requires Precise Price Forecasting
• Risk of Assignment

Conclusion

The long put calendar spread is best used during low volatility and benefits from high volatility and theta. However, it is also a complex strategy and requires precise price forecasting to get maximum profit. That's why using any and all resources, including option screeners, will help you get the most out of your trade.

If you need more information, visit the Barchart Options Learning Center where you can find more about long put calendar spreads, and also find other option trading strategies broken down into their working parts.