I am looking to solely make use of the theta decay and trying to overcome the effects of delta and Vega.


I sell ABC Feb OTM (strike price X) with 3 x 10 = Rs. 30 credit and buy ABC Mar OTM (strike price X) with 1 x 30 = Rs. 30 debit.

  1. Is Calendar spread Vega neutral?

Now, both the values are simply extrinsic values. How would calendar spread pair react to any change in Implied volatility?

  1. Is Calendar spread Delta neutral?

This is my biggest concern. I could imagine that when spot price moves, the neutrality may be disturbed, but the sell and buy at same strike price should somehow diminish the losses/profits made on underlying price movements. Will they do it?

  1. What are the factors that work solely to create losses? What are the factors that can work in both favorable and unfavorable ways?



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