Identifier: C3T5L1 · Revision: 2026-10-26 · Classification: domestic

Decision and objectives

Calculate a two-maturity spread with both signed legs. The decision record must connect the exposure, cash dates and implementable contract, rather than stop at a favorable price forecast.

By the end, you can calculate a two-maturity spread with both signed legs; separate roll execution from holding-period spread profit; stress unequal fills and disappearing margin relief.

Prerequisite: C3T8L5; completed Classes 1 and 2 and the Stock Market School foundation or Forex School foundation. All cases below are hypothetical; their prices, costs, rates, dates, contractual assumptions and collateral amounts are teaching inputs, not current offers.

Mechanics

A calendar spread combines opposite positions in the same underlying at different maturities. Here long near and short far trades a narrowing of far-minus-near. The underlying direction can partly offset, but the curve can move independently. Each leg has its own settlement and margin cash flow; a reduced portfolio requirement does not make the spread a prepaid bounded-loss product.

Price and return drivers

Define spread D = far − near. For equal multipliers and quantity, long-near/short-far gross profit = quantity × multiplier × (starting D − ending D). State this definition beside the result; reversing the spread quotation reverses the formula's sign. A quoted spread order must also have its leg ratio, execution rules and supported series confirmed.

Worked case

Hypothetical near 10,000 and far 10,300; buy five near and sell five far, TRY 10 multiplier each. Starting D = 300. Exit near 10,200 and far 10,400, D = 200. Near gain 5 × 10 × 200 = TRY 10,000; far loss −5 × 10 × 100 = −TRY 5,000; gross TRY 5,000. Four-leg round-trip commission TRY 400 and collateral funding TRY 600 give TRY 4,000 net before tax. Actual fills already include their spreads. Supplied portfolio margin TRY 35,000 is an assumption, not a live offset quote.

Adverse case

If far rises to 10,650 while near is 10,200, D = 450 and gross becomes −TRY 7,500; after costs −TRY 8,500. If only the five near buys fill before a 300-point drop, unpaired interim loss is TRY 15,000. Reduced spread margin cannot be assumed while the short far leg is absent. A roll of a short hedge must likewise close the near short and open the far short, leaving an unhedged interval if legged.

Practical use

Check whether a supported strategy order can execute both legs at an acceptable net price; otherwise define a maximum unpaired exposure and cancellation response. Compare actual bid/ask prices and timestamps across maturities. Reserve gross-leg liquidity if the margin credit disappears, plus commission, funding, parameter shocks and taxes. Daily settlement can require a cash debit on one leg before another gain is transferable.

Reconcile the confirmation, position register and cash statement separately. Costs include the quoted bid/ask spread, brokerage and clearing charges, collateral or principal financing, currency conversion, custody where relevant, and exit or termination charges. A mark is not a fill. Any amount explicitly excluded below remains outside the reported result. Tax is excluded from these teaching cases: an actual comparison requires income year, investor residence and individual/corporate status, contract and acquisition dates, settlement form and effective law. The GIB guide, checked 2026-10-26, covers 2025 individual investment income, so its publication date alone does not settle a 2026 derivative liability.

Decision boundaries

Use a calendar spread for a curve or roll objective that is explicitly distinguished from directional hedging. Reject an opportunity with no executable far leg or an unfunded unpaired state. Identical underlyings do not imply identical maturity risk or a guaranteed convergence date for a spread closed early.

Practice and references

Exercise: hypothetical long near/short far, two contracts each, TRY 5 multiplier. Spread narrows from 120 to 80. Calculate gross and net profit with TRY 80 fees and TRY 50 funding, then stress a spread of 170. Solution: gross = 2 × 5 × 40 = TRY 400. Fees TRY 80 and funding TRY 50 give TRY 270 net. If spread widens to 170, gross −TRY 500 and net −TRY 630; no outright price forecast is needed to compute either result.

Takeaway: Stress unequal fills and disappearing margin relief using the actual cash schedule, with every excluded cost and remaining exposure stated.

Reference card: viop-future. Formula: Long-near short-far spread profit. Glossary: Calendar spread, Leg risk. Next lesson: C3T5L2. Topic test.

Sources and verification date (2026-10-26):

Shared reference guide