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Breakeven size of underlying movement for calendar spread

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Reference no: EM131525724

A calendar spread is a combination of two options with different time to expiration. Calendar spread is also known as a time spread.

IV is $2/day. Underling is currently priced at $100. Assume normal distribution and zero interest rate.

You decided to long a 2 week ATM CALL option (DTE=1) and short a 1 week ATM CALL option (DTE=5).

What is the breakeven size of underlying movement for your calendar spread?

Reference no: EM131525724

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