Tuesday 16 Jun 2026. The 24,000 call of the 30 Jun expiry settled at 227.05 a unit. The same strike in the 28 Jul expiry settled at 466.15. Sell the first, buy the second, and the net bill was 239.10 a unit, Rs 15,541 a lot. On Monday 29 Jun the near call had fallen to 64.30 while the far call had slipped only to 376.90, so the pair was worth 312.60 and had gained Rs 4,778 a lot, with the index 53.75 points under the strike. Put the same spread on at the 23,250 strike on 10 Jun and the index ran away from it: the pair lost Rs 4,355 by 29 Jun. A calendar spread is a bet on time, and on the index staying near one strike. Every price is an NSE end of day settlement, dated, so nothing is live.

3By the end you can

  1. Build a call calendar spread from two dated settlement prices and track its value to a later date.
  2. Work out forward volatility from two implied volatilities and say what a calendar is exposed to.
  3. Describe how SPAN and the SEBI rule of 1 Oct 2024 treat the margin of a calendar spread on its expiry day.
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The idea, plainly

Two options on one strike, with different expiry dates. The near one runs out of time sooner, so each day it loses more than the far one does. A calendar spread sells the near option and buys the far one, and collects the difference as the days pass, provided the index stays close to the strike.

What is a calendar spread?

Same type, same strike, two expiries. Sell the near expiry and buy the far expiry. You pay a net debit, because the far option has more time and costs more. When the near option expires, the far one is still alive, so the position never turns into a naked short: the most it can lose is about the debit. It earns when the index sits near the strike as the near option expires, and it loses value when the index runs far from it, because both options then trade at intrinsic value and the gap between them closes.

Calendar spread
Pay = far price
less near price
Peak: index at the strike
when the near leg expires

A calendar spread peaks at the strike and gives value back on both sides

Payoff of a Nifty call calendar spread when the near option expires: a peak near the strike and a loss that flattens out on both sidesPayoff of the position at expiry. Breakevens at 23,768 and 24,238. Maximum profit in the range ₹6,811, maximum loss ₹11,999; at least one end of the range is still sloping, so the true extreme lies outside it. Spot 23,989.Profit or loss, ₹ for the whole position−₹15,000−₹10,000−₹5,000₹0₹5,00023,50024,00024,500Nifty at expirySpot 23,989BE 23,768BE 24,238Max profit ₹6,811No floor
Sell the 24,000 call of the 30 Jun expiry, buy the 24,000 call of the 28 Jul expiry, one lot, valued on 30 Jun 2026. The far leg is priced with Black 76 on the same forward as the near leg, so the peak reads a little low. Source: NSE end of day data, computed by RupeeCase. As of 16 Jun 2026.
Read one more paragraph, 57 words

The chart is the position on the day the near option expires, with the far leg priced by Black 76 at its own volatility. The peak sits at the strike, and the position gives value back on each side as the index moves away. Before that day the curve is lower and rounder, as with any spread.

Where does forward volatility come in?

Each expiry has its own implied volatility. What adds up is total variance, the volatility squared times the time. So two expiries, taken together, fix the volatility the market charges for the stretch between them: the forward volatility. With two volatilities and two times, it is the difference in total variance over the difference in time. A calendar is a position on that stretch. You hold the days after the near expiry and sell the days before it.

Forward variance =
(σ2² × T2 − σ1² × T1)
divided by (T2 − T1)

The volatility between two expiries moves further than the expiries' own volatilities do

At the money implied volatility of Nifty by expiry on 10 Jun 2026, with the volatility implied between expiries as dashed stepsTerm structure of at the money implied volatility: 16 Jun 14.6%, 23 Jun 14.8%, 30 Jun 15.0%, 7 Jul 14.8%, 14 Jul 16.1%, 28 Jul 14.8%, 25 Aug 14.9%, 29 Sep 14.2%. Dashed steps show the forward volatility between expiries.At the money implied volatility, % a yearAt the money IVForward vol between expiries12%14%16%18%20%16 Jun7 Jul28 Jul25 Aug29 SepExpiry, spaced by days to expiry14.6%16.1%14.9%14.2%
Each point is the at the money implied volatility of one expiry on 10 Jun 2026. The dashed steps are the forward volatility between neighbouring expiries. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026.
Read 2 more paragraphs, 163 words

On 10 Jun the at the money implied volatility was 15.0% to 30 Jun and 14.8% to 28 Jul. The dashed steps in the chart are the forward volatilities between neighbouring expiries, and they overshoot. Where implied volatility rises from one expiry to the next, the volatility between them sits above both. Where it falls, it sits below both. For the stretch from 30 Jun to 28 Jul the two volatilities were close and fell slightly with time, so the forward figure sits just under both. Total variance still grows with time, as it must. If it ever fell, the forward variance would turn negative, which no price can support. Module A05 takes that further.

Volatility moves the spread too. The far option has more time, so it carries more vega than the near one, and the pair as a whole gains when implied volatility rises and loses when it falls. A calendar can be right about the index and wrong about volatility.

What does a calendar spread need in margin?

  • The far leg is bought, so its premium is paid in full. SEBI's circular of 1 Oct 2024 made the net option premium payable upfront from 1 Feb 2025. For a calendar the net is a debit.
  • The near leg is sold, so it carries SPAN and exposure margin. SPAN, the margin model of NSE Clearing, revalues the two legs together, so the long far option offsets part of the sold one and the margin is lower than for the sold option alone. The rupees come from your broker's margin screen and move through the day.
  • The expiry day cut-off. The same circular removed the calendar spread benefit on expiry day from 1 Feb 2025 for index contracts. On the day the near leg expires, the expiring contract and the later one are margined separately, with no offset between them. Short index options expiring that day also carry extra extreme loss margin.

The example below marks both legs on Monday 29 Jun, the last session before the 30 Jun expiry and so the last one before the offset ends. That is a feature of the rule and of the data, not a suggestion about when to act.

Worked example: one strike, two entry dates

Both calendars sell the 30 Jun expiry and buy the 28 Jul expiry, settled on the index close for expiries before 7 Dec 2026. The lot is 65 units. The strike is the one nearest the future on the entry day, because these are monthlies. Every figure is a settlement price, and a real order crosses a bid and ask on each leg. Both calendars are valued on 29 Jun, the Monday before the near expiry, when the index closed at 23,946.25.

Two settlement prices make the debit, and two more mark the pair a fortnight later

A call calendar spread of 16 Jun 2026: sell the near call, buy the far call, net debit per unit, then the value of the pair on 29 JunDiagram with 4 boxes. Sell the 24,000 call, 30 Jun to Net debit 239.10 a unit; Buy the 24,000 call, 28 Jul to Net debit 239.10 a unit; Net debit 239.10 a unit to On 29 Jun the pair is worth 312.60.Sell the 24,000 call,30 Junreceive 227.05 a unitBuy the 24,000 call,28 Julpay 466.15 a unitNet debit 239.10 a unitRs 15,541 a lotOn 29 Jun the pair is worth312.60a gain of Rs 4,778 a lot
Settlement prices of 16 Jun and 29 Jun 2026. Source: NSE end of day data, computed by RupeeCase. As of 29 Jun 2026.
One lotEntered 16 JunEntered 10 Jun
Strike24,00023,250
30 Jun call on entry227.05321.65
28 Jul call on entry466.15552.95
Net debit, a unit239.10231.30
Net debit, a lotRs 15,541Rs 15,035
30 Jun call on 29 Jun64.30723.55
28 Jul call on 29 Jun376.90887.85
Value of the pair on 29 Jun312.60164.30
Result a lotRs 4,778−Rs 4,355
Read 2 more paragraphs, 165 words

The 16 Jun calendar was centred on the index. By 29 Jun the near call had fallen from 227.05 to 64.30, a drop of 162.75, while the far call fell from 466.15 to 376.90, a drop of 89.25. The pair widened by the difference and made Rs 4,778. One detail worth seeing: the near expiry's own volatility had risen to 15.9% by 29 Jun from 12.1%, which works against a short near leg. With a day left, time decay beat it.

The 10 Jun calendar had its strike at 23,250 and the index ended 29 Jun at 23,946.25, 696.25 points above. Both calls were then deep in the money and traded close to intrinsic value, so the gap between them shrank from 231.30 to 164.30 and the pair lost Rs 4,355, 29.0% of its debit in nineteen days. Two entries on one expiry pair, one centred and one not, show the shape. They do not show odds.

The common mistake

The belief: A calendar spread is low risk, because time decay always works in your favour. Decay works for the spread only while the index stays near the strike. The debit is also the cap on the loss, and here that debit was Rs 15,541 for one lot, held through a fortnight. When the index left the strike, as it did after the 10 Jun entry, the spread lost Rs 4,355 and time decay did nothing to repay it. The far leg also carries volatility risk: it is long vega, so a fall in implied volatility costs the position even when the index stands still. The margin offset ends on the near expiry day. And SEBI's Aug 2026 study of individual equity derivatives traders found that 87.7% lost money in FY26. A defined risk is a ceiling on the loss, and the ceiling here is high.

2 terms this section turns on

2 terms this section turns on2 terms this section turns on. Calendar spread: Two options of one type and strike with different expiries, one sold and one bought. The usual form sells the near expiry and buys the far one. Time decay: The fall in an option's time value as expiry approaches. It is faster for the near expiry.Calendar spreadTwo options of one type and strike withdifferent expiries, one sold and one bought.The usual form sells the near expiry and...Time decayThe fall in an option's time value as expiryapproaches. It is faster for the near expiry.
From the module glossary; every term is in the Learn glossary too. Source: Module 17.9, Option calendar spreads.

Key takeaways

  • A calendar spread sells the near expiry and buys the far one at one strike.
  • The near leg decays faster, so it gains while the index stays near the strike.
  • Far from the strike both legs trade near intrinsic and the gap shrinks.
  • Forward volatility is the far total variance less the near, over the time between.
  • The margin offset between the two legs ends on the near expiry day.
  • The debit caps the loss. Decay does not repay a big move.
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Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study