Reverse Calendar

A reverse calendar is an advanced volatility strategy that profits from large price movements occurring before near-term expiration, making it ideal for traders expecting significant market events or earnings announcements in the immediate future. This sophisticated two-leg strategy involves buying near-term options and selling longer-term options at the same strike, creating a position that benefits from rapid price movement and volatility expansion in the short term. Unlike traditional calendar spreads that profit from time decay, reverse calendars profit from volatility spikes and large directional moves that occur quickly. The strategy is particularly effective when traders expect major market catalysts such as earnings releases, regulatory announcements, or economic events that could cause immediate price volatility. Professional traders use reverse calendars when they believe significant price movement will occur before the near-term expiration, making the short-term options more valuable than the longer-term options. The strategy requires precise timing and strong conviction about near-term volatility events

If NIFTY is at ₹25,800, set up: Buy weekly ₹25,800 Call for ₹85, Sell monthly ₹25,800 Call for ₹140, creating ₹55 net credit with profit potential if NIFTY moves significantly before weekly expiration.