As the name implies, a calendar spread is a spread technique in which you profit from the price difference between futures contracts for the same underlying in different expiries. When compared to taking a directional view on the Nifty or individual stocks, this is considered a lower-risk and more predictable strategy. Calendar spread trades are popular among institutions and HNIs looking for low-risk tactics that allow them to earn significant rupee returns based on volume.
What Is A Calendar Spread? The Calendar spread is the purchase and sale of two futures contracts on the same underlying for different expiries. By buying one contract and selling the other, you can establish a calendar spread between Nifty June and Nifty July, for example. This way, your calendar spread payoffs depend on the spread increasing or contracting. For example, the Calendar spread definition states that you go long on the Calendar spread when you expect the spread to broaden and short on the Calendar spread when you expect the spread to reduce.
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