Options Outlook: Calendar Spread Screener Results for March 24th

Calendar spreads are a versatile options strategy that allows traders to capitalize on time decay and changes in implied volatility.

This strategy involves selling a short-term option while simultaneously buying a longer-term option at the same strike price, creating a position that benefits from the passing of time and potential volatility shifts.

Calendar spreads are often used when traders expect limited price movement in the short term but anticipate increased volatility or a directional move later on.

They can be structured with calls or puts, making them useful for both bullish and bearish outlooks.

Let’s take a look at Barchart’s Long Call Calendar Screener for March 245th. 

I have added a filter for Market Cap above 40b and total call volume above 2,000 to remove small capitalization stocks.

The screener shows some interesting calendar spread trades on popular stocks such as BA, TSLA, MU, PLTR and TSM. Let’s walk through a couple of examples.

Boeing Calendar Spread Example

Let’s use the first line item as an example.

With Boeing stock trading at $178.11, setting up a calendar spread at $170 gives the trade a slightly bearish outlook.

Selling the Mar 28 call option with a strike price of $170 and buying the May 16, $170-strike call will cost around $635. That is also the most the trade can lose.

The estimated maximum profit is $400, but that could vary depending on changes in implied volatility. 

The idea with the trade is that if Boeing stock remains trades around $170 for the next few days, the sold option will decay faster than the bought option allowing the trade to be closed for a profit.

The breakeven prices for the trade are estimated at around $162.50 and $179, but these can also change slightly depending on changes in implied volatility.

In terms of trade management if BA stock broke through either $163 or $179, I would look to adjust or close the trade.

Let’s look at another example.

Tesla Calendar Spread Example

With TSLA stock trading at $1248.71, traders could sell the $240-strike April 4 call and buy the $240-strike May 16 call.

That results in a net cost for the trade of $1,275 per spread, and that is the most the trade can lose.

The estimated maximum profit is $1,050, but that could vary depending on changes in implied volatility. 

The breakeven prices for the trade are estimated at around $217.50 and $270 but these can also change slightly depending on changes in implied volatility.

Micron Calendar Spread Example

The last example we will look at is on MU stock.

With MU stock trading at $94.72, traders could sell the $90-strike March 28 call and buy the $90-strike May 16 call.

That results in a net cost for the trade of $415 per spread, and that is the most the trade can lose.

The estimated maximum profit is $230, but that could vary depending on changes in implied volatility. 

The breakeven prices for the trade are estimated at around $85 and $96 but these can also change slightly depending on changes in implied volatility.

Mitigating Risk

Thankfully, calendar spreads are risk defined trades, so they have some build in risk management. Position sizing is crucial to ensure that minimal damage is done if the trade suffers a full loss.

One way to set a stop loss for a calendar spread is close the trade if the loss is 20-30% of the premium paid. 

Calendar spreads can also contain early assignment risk, so be mindful of that if the stock breaks through the short strike and it’s getting close to expiry.

Please remember that options are risky, and investors can lose 100% of their investment. 

This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.