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Calendar Spread Example – AAPL Stock

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by Gavin in Blog
May 27, 2022 1 comment
calendar spread example

This calendar spread example is an income trade that involves selling a short-term option and buying a longer-term option at the same strike.

Usually, this is done with monthly options, but it can also be done with weekly options.

Traders typically use call options unless the trade has a bearish bias, in which case they would use puts.

In today’s example, we’ll look at a calendar spread trade on Apple (AAPL) stock.

With Apple stock trading around 144, setting up a calendar spread at 145 gives the trade a neutral outlook.

Selling the June 17 call option with a strike price of 145 will generate around $445 in premium, and buying the July 15, 145 call will cost approximately $680.

That results in a net cost for the trade of $235 per spread, and that is the most the trade can lose.

The estimated maximum profit is $300, but that could vary depending on changes in implied volatility.

The idea with the trade is that if AAPL stock remains around 145 for the next few weeks, 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 136.65 and 154.35, but these can also change slightly depending on changes in implied volatility.

For this reason, calendar spreads are considered a more advanced strategy and not recommended for beginners.

For a trade like this, I would set a profit target of 30%, and I would set a stop loss if AAPL stock breaks through either 136 or 155.

We hope you learned something from this calendar spread example, and if you have any questions, please send us an email or post a comment below.

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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1 Comment
  1. Lukshme Bain says:

    Hi Gav,
    How di did you calculate the break even price ? is from the options premium price?

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Options Trading 101 - The Ultimate Beginners Guide To Options

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