Identifier: C4T6L3 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Choose whether the method addresses this lesson’s task before placing an order. Objectives: 1. Value a calendar at the near expiry using remaining-option values. 2. Distinguish calendar from diagonal strikes. 3. Identify continued risk after the near leg expires.

Prerequisite: C4T6L2.

All numbers, quotes, contract terms and dates in the case are hypothetical teaching assumptions, not a listed series or offer. Unless varied below, options are European, expire together in 90 calendar days, are cash settled in TRY, and use 100 underlying units per contract. Premiums are TRY per underlying unit, paid at entry; signed quantities identify long (+) and short (−) legs. Assume no distributions and zero financing for the isolated payoff, no holiday adjustment, and final cash on the next business day. Actual tax is excluded, not assumed zero.

Mechanics

A calendar spread uses different expiries at the same strike; a diagonal also uses different strikes. The farther-dated right remains unresolved when the near option expires, so a single common-expiry payoff diagram does not apply. A typical long call calendar buys the far call and sells the near call, but its current volatility, time and directional exposures depend on both legs. It is not a guaranteed way to collect near premium while keeping free long-term protection.

Price and return drivers

At the near expiry, package value equals the supplied remaining value of the far option minus the near option’s resolved payoff. It depends on underlying, remaining volatility surface, time, distributions and rates. It cannot be derived from the far strike’s intrinsic value alone. A debit at entry does not by itself prove maximum loss equals that debit for every interim path or exercise style; the near short can require cash or stock delivery while the far right remains unexercisable.

Worked case

Override expiries: +1 European cash-settled K100 call expiring90 days, premium8;−1 K100 call expiring30 days, premium4; multiplier100. Debit400, total comparison charges40. At the near expiry supply conditional far-option values2 atS90,6 atS100,13 atS110. The near call pays0,0,10. Package net P/L if the far call is sold at those supplied executable bids is200−400−40=−240,600−400−40=+160, and1300−1000−400−40=−140. The best listed state is near the common strike, but these three quotes do not establish a global maximum.

Adverse case

If the near-expiry S100 far bid falls from6 to3 after an event, net becomes300−400−40=−140 instead of+160. A diagonal replacing the near short strike with105 would pay500 atS110, so the same far bid13 gives1300−500−400−40=360 if the net debit is held at400 solely for a controlled hypothetical comparison. Actual different strikes would have different opening quotes. Before the near expiry, both legs need valuation; after it, any retained far call is a new standalone exposure. At the far expiry it can still become worthless.

Practical use

Plan near-leg settlement and the far-leg sale or retention separately. The unexpired option may be valuable but cannot necessarily supply immediate settlement cash.

For any actual domestic implementation, verify the exact issue/contract, authorized intermediary, account permission and executable size. Include spread, commissions, passed-through fees, funding/borrow, custody and exercise/exit costs without double-counting embedded charges. Recheck income year, residency/status, issue/acquisition dates and effective tax law; all case results remain before actual tax.

Decision boundaries

Use different expiries only with a specific horizon thesis and a plan at each expiry. The far leg is not an automatic cash source for a near settlement demand. Physical settlement can create an uncovered share position; American exercise can accelerate that problem. Decline when the analyst lacks a credible far-option stress table or sufficient settlement cash. A same-expiry spread can be simpler when a bounded terminal difference is the real need.

Practice and references

Exercise: +1 far K50 call premium6,−1 near K50 call premium3; multiplier100; charges30. Solution: At near expiryS55, supplied executable far bid8: package value800−500=300; original debit300 and charges30 leave−30. If the far bid is10 instead, net170. The same underlying fixing can therefore produce materially different calendar outcomes.

Takeaway: At the near expiry, value the surviving far option instead of replacing it with terminal intrinsic. Reference links: product card, formula; glossary: Calendar spread; Diagonal spread; Near expiry. Next: C4T6L4. Topic test.

Sources: Borsa Istanbul: Options (retrieved 2026-10-26; General information and basic concepts). Borsa Istanbul: Settlement Method (retrieved 2026-10-26; Settlement by contract family). Options Industry Council: All Strategies (retrieved 2026-10-26; Strategy descriptions). GIB: Provisional Article67 Guide for Individuals (retrieved 2026-10-26; Sections1,3–9 and19; publication introduction). Revision 2026-10-26; recheck changing terms before publication.

Shared reference guide