Calendar or Time Spread (continued)
In January the investor sells the APR 50 call and buys the July 50. His debit position is -3 points.
In April the price is unchanged and the 3 month call (July) should be worth 5. The spread between the April 50 and the July 50 has now widened to 5. Since the spread cost 3, a 2 pt. profit exists. Investor should now close his long position by selling his July 50 call and reaping a 2 pt. profit.