Lets say I think XYZ will rise in the near future but I am not sure it will happen too fast.
XYZ is traded at 100, I open a calendar spread by buying week 2 110 call for 2$, and selling week 1 110 call for 1$.
I have a net debit of 1$.
Now I understand that the best thing for me is that at expiration XYZ will trade exactly at 110 which is great and all but!
If suddenly XYZ discovered how to cure cancer and now it is traded at 130, now it means I have to buy back the short call resulting…