Calendar spreads are time spreads, essentially. They are options strategies comprised of the sale of one call and simultaneous purchase of a call with the same underlier and strike price. However, the expiration month of the purchased call occurs "further out" (or later) than the expiration month of the sold call.

Because the underlier merely needs to be at roughly the same strike price as the sold call, profit can be made with a narrow margin. However, a loss can occur when the underlier is significantly above or below the sold strike price. This can create a neutral outlook strategy, where the investor does not anticipate much movement before expiration.

Still, an investor can create a more aggressive (also known as "bull-oriented") calendar spread with a call. You might want to consider a secondary, follow up action for a neutral calendar spread, providing that the sold call is trading close to parity. You might want to avoid exercising too early in this scenario, to avoid needless commission costs.

How to Maximize Returns on Calendar Spreads

Regardless of your specific scenarios involving calendar spreads, you need some basic rules to follow in order to maximize your profitability. Gone are the days of having a personalized broker give your portfolios the attention they truly deserve. As more people enter the trading market, you need to find solid advice from a professional--specifically one who has made his or her own rules work and received high returns using them. Look online and find quality calendar spread advice.