---
description: "A horizontal spread buying a longer-dated ATM put at TTM T' and selling a shorter-dated ATM put at the same strike K with TTM T < T', profiting from time decay when stock stays near K."
tags: [options, income, neutral, calendar-spread]
---

# Calendar Put Spread

**Section**: 2.19 | **Asset Class**: Options | **Type**: Income

## Overview
The calendar put spread (horizontal spread) consists of a long position in a near-ATM put option with TTM T' and a short position in a put option with the same strike K but shorter TTM T < T'. This is a net debit trade. The trader's outlook is neutral to bearish. The best case at expiration of the short put (t = T) is if the stock price is right at the strike (S_T = K), maximizing the remaining value V of the long put.

## Construction
- Buy 1 put option at strike K, TTM T' (longer expiry)
- Sell 1 put option at strike K, TTM T < T' (shorter expiry), same strike

Net debit: D

## Payoff Profile
At t = T (expiry of short put), let V = value of the long put (expiring at T') assuming S_T = K:

- P_max = V - D  (if S_T = K at short expiry)
- L_max = D  (net debit paid)

If K <= S_T <= S_stop-loss, the trader can roll by writing another put with strike K and TTM T1 < T'.

## Key Conditions / Signals
- Neutral to mildly bearish; expects stock to remain near K through T
- Low volatility environment after entry is ideal
- Best suited for income generation by repeatedly selling shorter-dated puts against the long put

## Notes
This strategy resembles the covered put strategy in structure. While maintaining the long put, the trader can generate income by periodically selling put options with shorter maturities. The stop-loss price S_stop-loss defines the level above which the entire position is unwound.