Bull Calendar Spread Strategy
1. Definition
The bull calendar spread strategy is a type of options trading strategy. It involves buying a call option with a later expiration date and selling a call option with an earlier expiration date at the same strike price and quantity. Generally, the strike price should equal the current spot price, or at least the difference between the two should be minimal.
2. How It Profits
In the options trading market, the closer an option is to its expiration date, the shorter the window and the fewer opportunities for the market and investors to react. Time has an increasingly greater impact on price movements. Generally speaking, shorter-term options have greater potential for value decline compared to longer-term options (time decay). Traders profit from this dynamic. This relationship remains unchanged as long as there are no significant changes in other external factors (such as spot price, implied volatility, and time discount rate).
Additionally, volatility typically rises over longer periods while declining over shorter periods. The differing volatility changes across options with different expiration dates create some mispricing opportunities. This is broadly understood as the term structure of volatility: depending on the different expiration dates of options on the same cryptocurrency, the pricing impact of volatility changes varies. This is also where traders find their profit potential.
For buyers of the bull calendar spread strategy, traders typically close their positions at the short leg's expiration as expected to mitigate the impact of approaching expiration dates and term structure changes on potential volatility. If the trade remains open until the long leg expires, the bull calendar spread automatically transforms into a bull strategy, meaning the trader only expects to profit from price changes.
From the perspective of sellers of the bull calendar spread strategy, they may believe the market has overreacted to the volatility term structure. Traders can obtain higher premiums by selling this strategy but also face the risk of market movements going against their expectations.
Theoretically, the maximum returns and losses of this strategy are unlimited under the influence of the term structure or volatility.
3. Trading Details
The following conditions must be met to execute this strategy:
1) The two legs must have the same quantity, i.e.:
Buy 1 in-the-money call option (Leg 1)
Sell 1 in-the-money call option (Leg 2)
2) The two legs must have the same strike price but different expiration dates
Tip 1: Regarding Margin Rules
Long position: Must meet the initial margin and maintenance margin rate requirements for the short call option (Leg 2)
Short position: Must meet the initial margin and maintenance margin rate requirements for the short call option (Leg 1)
Portfolio margin mode: Since Leg 1 and Leg 2 are correlated, some risks are offset, and margin requirements are reduced accordingly
Tip 2: Regarding Net Strategy Value
Long position: Leg 1 premium (ask price) (later expiration) – Leg 2 premium (bid price) (earlier expiration)
Short position: Leg 2 premium (ask price) (earlier expiration) - Leg 1 premium (bid price) (later expiration)
Tip 3: Regarding the Returns Curve Chart
4. Specific Trading Example
Assuming a trade using this strategy, the trading details are as shown in the table below:
There will then be the following 3 scenarios —
Scenario 1 (In-the-money situation):
BTC price at Leg 2 expiration: $21,000, then:
Typically, traders close their positions at the short leg's expiration as expected. Therefore, at Leg 2 expiration:
Total loss: Net strategy value + (expiration price 2 - strike price 2) - Leg 1's premium at Leg 2 expiration
Scenario 2 (No price change):
BTC price at Leg 2 expiration: $20,000, then:
Since both legs are at-the-money (ATM), there will be a net strategy value loss. Traders typically close their positions at Leg 2 expiration, i.e.:
Total returns: Leg 1's premium at Leg 2 expiration - Net strategy value
(Leg 1's premium at Leg 2 expiration: Leg 1's original premium - Leg 1's time decay)
In this scenario, we assume all other indicators of Leg 1 remain nearly unchanged and are greater than (not guaranteed) Leg 2's premium. Traders can collect the spread caused by time decay between Leg 1 and Leg 2, profiting from this difference.
Scenario 3 (Worst-case scenario):
When Leg 2 expires, the short leg is in-the-money (ITM) and the long leg is out-of-the-money (OTM). Assume:
BTC price at Leg 1 expiration: $15,000 (expiration price 1)
BTC price at Leg 2 expiration: $25,000 (expiration price 2), then
Typically, traders close their positions at the short leg's expiration as expected. Therefore, at Leg 2 expiration:
Total loss: Net strategy value + (expiration price 2 - strike price 2) - Leg 1's premium at Leg 2 expiration
Disclaimer
This article may contain product-related content that does not apply to your region. This article is intended solely to provide general information and makes no representation as to any factual errors or omissions. This article represents the author's personal views only and does not constitute the views of OKX. This article is not intended to provide any advice, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins) involves a high level of risk and prices may fluctuate significantly or even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions about your specific circumstances, please consult your legal/tax/investment professional. The information provided in this article (including market data and statistics, if any) is for general reference purposes only. Although we have taken all reasonable precautions in preparing this data and these charts, we accept no responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in its entirety or in excerpts of 100 words or less, provided that such use is for non-commercial purposes. Any reproduction or distribution of the full article must prominently state: "This article is copyrighted © 2025 OKX, used with permission." Permitted excerpts must cite the article name and include the source, e.g., "Article name, [author name if applicable], © 2025 OKX". Some content may have been generated or assisted by artificial intelligence (AI) tools. Derivative works and other uses of this article are not permitted.
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