Put Calendar Spread
Long put calendar spreads profit from a slightly lower move down in the underlying stock in a given range. They also profit from a rise in implied volatility and are therefore a low-cost way of taking advantage of low implied volatility options. Calendar spreads lose if the underlying moves too far in either direction. The maximum loss is the debit paid, until the option you sold expires. After that, you are long an option and your remaining risk is the entire value of that option. Options in near-month expirations have more time decay than later months because they have a higher theta. The calendar spread profits from this difference in decay rates. This trade is best used when implied volatility is low and when there is an implied volatility "skew" between the months used, specifically when the near-month option sold has a higher implied volatility than the later-month option bought.