Calendar Spread
Calendar Spread — Relative vol trade across expiries exploiting term structure dislocations.
Definition
Calendar Spread refers to relative vol trade across expiries exploiting term structure dislocations. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Options and futures embed views on vol, skew, and path that cash markets only hint at. When relative vol trade across expiries exploiting term structure dislocations shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what calendar spread is saying. If relative vol trade across expiries exploiting term structure dislocations moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
State the expiry and Greek exposure; unmarked vol or pinning effects rewrite the thesis. Prefer a short written null hypothesis for Calendar Spread: what would falsify the current reading in the next window?