Short the front month and own a later one at the same strike. The near leg gives up time value faster than the back leg does, and that difference is the whole of the return. It is the one structure on this site whose payoff is not a set of straight lines: when the front expires the back is still alive and has to be valued by a model, so there is no arithmetic maximum to quote. It wants the underlying to sit still and it gains if implied volatility in the back month rises. Set both expiries here and read the modelled value at the front expiry rather than a payoff diagram.
Two options at the same strike, different expiries, usually filled as a single calendar order — most platforms support this directly, which matters because legging in exposes the position to the underlying moving between the two fills at two different implied volatilities. Because the position's value at the front expiry depends on the back month's implied volatility at that moment, not on anything fixed today, there is no single 'right' width or strike — only a most-likely level, chosen from where the underlying is expected to sit.
Because the position has no closed-form maximum, many traders manage it by a target debit recovered — commonly closing once the position is worth some multiple of what was paid — rather than by a price target on the underlying, since the underlying finishing exactly at the strike is the best case and cannot be relied on. Early assignment on the short near leg, if it happens, leaves a long back-month option against a short stock or futures position rather than against nothing, which is a different and usually undesired exposure. This is typically approved at a spread-trading account tier, similar to a vertical, despite the model-dependent payoff.
Common mistake. The common mistake is holding to the front expiry expecting the theoretical maximum, which requires the underlying to sit exactly at the strike — a coincidence, not a plan.
| # | Action | Instrument | Strike |
|---|---|---|---|
| 1 | Sell | Call (14d) | 580 |
| 2 | Buy | Call (49d) | 580 |
No price grid is shown here: this structure has no closed-form payoff at expiry — the back leg is still alive and has to be valued by a model. Use the payoff curve in the calculator above.
| Strategy | Market view | Opened for | Legs vs. this one |
|---|---|---|---|
| Diagonal Spread | Directional — with a time component | Debit | same |
| Call Butterfly | Neutral — pinned | Debit | +1 |
| Long Straddle | Volatility — direction-agnostic | Debit | same |
| Iron Condor | Neutral — range-bound | Credit | +2 |