A calendar spread requires the purchase and sale of two calls or two puts in the same stock with
A) the same expiration date but different exercise prices.
B) the same exercise price but different expiration dates.
C) different exercise prices and different expiration dates.
D) the same exercise price and the same expiration month.
E) traded in different markets.

Question

Quizplus · Accepted Answer

A calendar spread involves the purchase and sale of two options with the same strike price but different expiration dates. This allows traders to profit from the time decay of the option with the shorter expiration while holding onto a long position in the option with the longer expiration. Therefore, option B is the correct answer.

A Calendar Spread Requires the Purchase and Sale of Two