Calendar & diagonal spreads
Can a Calendar spread be executed as a Net Credit trade, and what are the structural risks of doing so?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A calendar spread can occasionally be executed for a net credit if the short near-term option's premium exceeds the long longer-dated option's cost, usually due to unusual term-structure inversion or skew.
How it works
This situation is atypical and often signals elevated near-term implied volatility (backwardation) reflecting market stress or an anticipated event, changing the risk profile from the standard debit calendar.
An example
Ahead of a binary event, short-term IV may spike so high that selling the front-month option brings in more premium than the cost of the longer-dated option, creating a net credit.
Risk & limitations
A credit calendar implies the market expects a large near-term move, increasing gap risk; the structural risks are generally higher, not lower, than a standard debit calendar.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.