A calendar straddle that is designed to profit as the underlying is expected to break out in either direction. This strategy involves the purchase of a near-term straddle (i.e., a long straddle) and the sale of a longer-term straddle (i.e., a short straddle). More specifically, an investor pursuing a short calendar straddle strategy should buy a short-term at-the-money call option and a short-term at-the-money put option, and sell a long-term at-the-money call and a long-term at-the-money put, all at the same time.

Notwithstanding the direction taken by the underlying, the time values of all the options involved would fade out over time. Therefore, the calendar straddle embarks on the difference between the gain in time value on the long-term options purchased and the loss in time value on the short-term options sold.

The short calendar straddle is instrumental to investors looking for a higher potential profit than loss and a position that requires no cash upfront to be established.

The short calendar straddle is also referred to as a short horizontal straddle.