Calendar Spread trades should be initiated during times of low volatility.

by dengkane on 2009-11-02 14:43:54

This type of transaction anticipates that the price will fluctuate within a certain range over a future period of time, and if the fluctuation exceeds a certain range, there will be a loss. However, large fluctuations will expand the profit range of this transaction, because when the volatility increases, the time value of options with longer delivery times rises faster, while the time value of options with shorter delivery times rises slowly, or may even continue to erode.