The Rollout Maneuver
As previously mentioned, a primary feature of the calendar spread is the ability to continue establishing a new calendar spread each month. In the ideal scenario, as illustrated previously, the front-month option is allowed to expire worthless, thereby leaving the long-term option with a reduced cost basis. Then the next-month option with the same strike can be sold to establish the new calendar spread.
The process of converting the old calendar spread into a new calendar spread does not necessarily require waiting until the expiration date arrives. Frequently, the conversion is best accomplished by buying back the front-month option before expiration while simultaneously selling the next-month option. This maneuver is called ...
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