Long Put Calendar Option Strategy

A long put calendar option strategy is created by selling a short-term put option and buying a long-term put option at the exact same strike price. You pay a net fee to enter the trade because the long-term option costs more than the short-term option brings in. Investors use this setup when they expect the stock price to remain relatively flat near the chosen strike price until the short-term option expires.

The maximum profit is achieved if the stock price closes right at the strike price when the short-term option expires, letting that sold option expire worthless while the long-term option retains significant value. The maximum loss is limited to the initial net fee paid to open the trade, which occurs if the stock makes an extreme move in either direction away from the strike price.