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Market Intelligence › Basic Terminologies
The near-month versus far-month difference, and what this position earns from
Published by The Retail Trader · AUG 04, 2026 · Derivatives (F&O)
Most option strategies change the strike within a single expiry. A calendar spread does the opposite — it keeps the strike the same and changes the expiry.
In it you sell a near-expiry option and buy the far-expiry option at the same strike. Two different expiries, one strike.
The logic is that the near month's time value is falling fast and the far month's slowly. The profit of this position lies hidden in that difference in decay.
A calendar spread is not a directional bet, and its conditions are different:
• It is best if the underlying stays near the strike, and it loses if the underlying runs far away.
• When volatility rises the far leg gains more, so this position is vega positive.
• Two legs mean paying the spread twice and charges twice.
• The far month is often less liquid, so the exit can be expensive.
The biggest practical cost of multi-leg strategies is execution, not theory. If the two legs are filled separately and the price moves in between, the entire expected edge can be gone at entry itself.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no guaranteed-return claim, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.