Jelly Roll

A jelly roll is an advanced four-leg calendar arbitrage strategy that exploits time decay and interest rate differentials between different expiration months, making it a sophisticated tool for professional traders seeking to profit from temporal pricing inefficiencies. This complex strategy involves creating synthetic positions in different expiration months by selling a near-term synthetic long position and buying a longer-term synthetic long position, effectively capturing the time value differential between the two periods. The strategy is particularly effective when there are significant differences in implied interest rates or dividend expectations between expiration cycles, creating opportunities for enhanced returns through careful calendar positioning. Professional traders use jelly rolls as part of comprehensive volatility and calendar trading programs that seek to extract value from time decay patterns and seasonal volatility effects. The strategy requires sophisticated understanding of carry costs, dividend timing, and early assignment probabilities to optimize profit potential while managing execution risks. Jelly rolls are often combined with other calendar strategies to create complex multi-dimensional trading programs that profit from various market inefficiencies simultaneously

If NIFTY is at ₹25,800, set up: Sell weekly ₹25,800 Call for ₹85, Buy weekly ₹25,800 Put for ₹80, Buy monthly ₹25,800 Call for ₹140, Sell monthly ₹25,800 Put for ₹135, creating ₹10 net debit with profit potential from favorable time decay and interest rate differentials.