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Reverse Calendar Spread


What does Reverse Calendar Spread mean?

A spread that involves simultaneous purchase of a futures contract for a nearby month and sale of another futures contract for the same underlying assetin a more distant month. While a calendar spread involves sale of contract for upcoming month and purchase for farther month, it is just opposite in reverse calendar swap month- purchase of a nearby month futures contract and sale of distant month futures contract.

Futures Knowledge Explains Reverse Calendar Spread

For example, you can go long on Gold June futures and go short on Gold Sep futures simultaneously for the same quantity. Here you purchase is one futures contract and sale of another for the same underlying asset but expiring in two different calendar months. The reverse calendar swap is done in the expectation that the price relationship between two will change and yield a net profit. This strategy has limited risk and the maximum possible loss is known up front. This is more suitable when there is less volatility and price movement is likely to be range-bound. It makes profit within a given range.



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