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1. Lecture No 14
Calendar Call
(Weekly Options)
Rohan Sharma (Coach)

2. Basics Concepts – Covered Short Strangle
Proficiency -
Intermediate
Direction –
Bullish
Asset Leg –
Long Call +
Short Call
Max Risk -
Limited
Max Reward -
Limited
Income
Strategies

3. Description – Calendar Call
 Calendar spreads are known as horizontal spreads, and the Calendar Call is a variation of a
Covered Call, where you substitute the long stock with a long-term long call option instead.
 The Calendar Call certainly requires less investment; however, the shape is different.
If the stock rises too far too soon, then the Calendar Call can become loss-making.
So even though you got the direction of the trade right, you could still lose money
Buy a long-term expiration call with a near the money strike price.
Sell a short-term call (say monthly) with the same strike price.

4. Context - Calendar Call
Outlook
With a Calendar Call, your outlook is neutral to bullish. You expect a
steady rise.
Rationale
To generate income against your longer term long position by selling
calls and receiving the premium.
• Net Position
 This is a net debit transaction because your bought calls will be more
expensive than your sold calls, which have less time value.
Your maximum risk on the trade itself is limited to the net debit of the
bought calls less the sold calls. Your maximum reward is limited to the
residual call value when the stock is at the strike price at the first
expiration, less the net debit.

5. Context - Calendar Call
Effect of Time Decay
 Time decay affects your Calendar Call trade in a mixed fashion. It
erodes the value of the long call but helps you with your income
strategy by eroding the value faster on the short call.
Time Period to Trade
 You will be safest to choose a long time to expiration with the long
call and a short time for the short call.
Breakeven Down = Depends on the value of the long call option at
the time of the short call expiration
Breakeven Up = Depends on the value of the long call option at the
time of the short call expiration

6. Steps to Trading a Calendar Call
Steps In
Try to ensure that the trend is upward or range bound and identify clear areas of
support and resistance.
• Steps Out
Manage your position according to the rules defined in your Trading Plan
If the stock closes above the strike at expiration, you will be exercised.
You will sell your long call, buy the stock at the market price, and deliver
it at the strike price, having profited from both the short option premium
you received and the uplift in the long option premium.
If the stock remains below the strike but above your higher stop loss, let
the short call expire worthless and keep the entire premium.
If the stock falls below your lower stop loss, then either sell the long
option (if you’re approved for naked call writing) or reverse the entire
position.

7. Exiting the Trade - Covered Short Strangle
Exiting the Position
 With this strategy, you can simply unravel the spread by
buying back the calls you sold and selling the calls you
bought in the first place.
Advanced traders may leg up and down as the underlying
asset fluctuates up and down.
In this way, you can take incremental profits before the
expiration of the trade.

8. Exiting the Trade - Calendar Call
Mitigating a Loss
Unravel the trade as described previously.
Advanced traders may choose to only partially unravel
the spread leg-by-leg.
In this way, they will leave one leg of the spread
exposed in order to attempt to profit from it.

9. Advantages and Disadvantages
Advantages
Generate monthly income.
Can profit from range bound stocks and make a higher yield than
with a Covered Call.
Disadvantages
Capped upside if the stock rises.
Can lose on the upside if the stock rises significantly.
High yield does not necessarily mean a profitable or high probability
profitable trade.

10. Real Time Example
Calendar Call
Rohan Sharma (Coach)

11. Price Movement
Position on Charts
Rohan Sharma (Coach)

13. Example – Covered Short Strangle
Market Behavior Nifty
Option /Future Option & Future Both
Action (Long/ Short) Both
Price Movement Expectation Side Ways
Future (Long) 10900
Strike Price (Short Option) = Call 11000 Premium 60
Strike Price (Short Option) = Put 10800 Premium 65
Time to Expiry Mid/Last of the Month
Position of Price in Charts Sideways
Max Risk Unlimited
Max Reward Limited

14. Covered Short Strangle
Strike Price (Call Short) 11000 Premium 60 BEP 11060
Strike Price (Short Put) 10800 Premium 65 BEP 10735
Future Long 10900
Nifty at Expiry Long Future
10900
Short Call (BEP)
11060
Short Put (BEP)
10735
Total P&L
11400 500 -340 65 225
11300 400 -240 65 225
11200 300 -140 65 225
11100 200 -40 65 225
11000 100 60 65 225
10900 0 60 65 125
10800 -100 60 65 25
10700 -200 60 -35 -175
10500 -400 60 -235 -575