Calendar & diagonal spreads
Why do we want the front-month option to expire exactly at the strike price of our long back-month option?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Having the front-month option expire exactly at the long back-month strike maximizes the front option's time-value decay captured as worthless expiration, while the long back-month option retains maximum remaining extrinsic value.
How it works
This scenario represents the theoretical point of peak profitability for a standard long calendar because the short option contributes zero intrinsic value loss while the long option benefits from being at-the-money with time remaining.
An example
If both legs are at the 100 strike and the stock closes at exactly $100 at front-month expiration, the short call expires worthless while the long call retains substantial time value.
Risk & limitations
Precisely pinning a strike at expiration is rare and uncontrollable; most calendars realize partial, not maximum, theoretical profit due to natural price movement away from the target strike.
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.