Bull Calendar Spread Strategy

The bull calendar spread strategy is created by buying a long term slightly out-of-the-money call option and simultaneously writing an equal number of near month calls of the same underlying asset with the same strike price.

You would deploy this strategy if you think the long term outlook for any particular underlying asset is bullish (heading for an upturn). You’re effectively selling the near month calls with the intention of riding the long term calls for free.

Here’s how it’s constructed:

Sell 1 Near-Term Out of the Money (OTM) Call – Buy 1 Long-Term Out of the Money (OTM) Call

Maximum Potential Profit

If the near month options expire worthless, this strategy turns into a discounted long call strategy, so the upside profit potential for the bull calendar spread becomes unlimited.

Maximum Potential Loss

The maximum possible loss for the bull calendar spread is limited to the initial debit taken to put on the spread. This happens when the stock price goes down and stays down until the expiration of the longer term call.

Bull Calendar Spread Example

Let’s say its May and Apple (AAPL) stock is trading at $40, you decide this is undervalued and the price is likely to rise over the next three months. So you enter a bull calendar spread by buying an SEP 45 out-of-the-money call for $200 and writing a JUN 45 out-of-the-money call for $100. The net investment required to put on the spread is $100.

In June, the stock price of AAPL has risen to $42 and the JUN 45 call expires worthless. Subsequently, the price of AAPL stock has risen to $49 by September. The SEP 45 call expires in the money and is worth $400 upon expiration. Since the initial debit taken to enter the trade is $100, your profit comes to $300.

Now let’s look at what happens if the stock price doesn’t rise and remains at or below $45 until expiration of the long term call in September. In this case you’ll lose the initial debit of $100 as both calls expire worthless.


To make the above example easier to understand we’ve left trade commissions out of the equation. In the real world you’ll have to pay commissions to your broker for every trade you make. Typically these commissions are around $10 to $20 if you use a traditional retail broker like OptionsXpress.

But when you get a little more experience and you start experimenting with more advanced options strategies that contain 3 or more individual contracts, these commissions can become expensive. When you get to this stage you’d be well advised to sign-up for an account with a broker that specializes in frequent trading.

A good example of this type of broker is OptionsHouse whose fees start at $0.15 per contract (+$8.95 per trade) for frequent traders.


The bull calendar spread strategy is an excellent strategy for long term options trading, add to the fact that it has open ended profit potential and limited losses and you can see why this strategy is so popular.

It’s the perfect strategy for part time traders to learn since it only contains two contracts spread over the long term, so you don’t need to sit monitoring it every day like some shorter term strategies.

Always remember to try it out in a virtual environment first before you commit any real capital. I know you’ll be eager to start, but believe me you’re much better off waiting until you’ve carried out a few test trades first. Then you’ll be confident you know how the system works and won’t panic if the trade temporarily turns against you.