A time spread using call options is a strategy that buys and sells the same number of options with the same strike prices, but different expirations.

Time spreads are sometimes called calendar spreads or horizontal spreads. They make money based on the time decay of the options being shorted. Two calls are used: one is shorted and one is purchased, and both have the same strike price and same underlying security.

Normally an investor will sell a near-month call (“short” it) and buy a far-month call (a “long” position). This is considered a long call calendar spread, and is a bullish position.

A short call calendar spread would hold the near-term option long and the far-term option short, but this would leave you with a naked call short if the price went up after the near-month option had expired-- you would not want the price to move up at all in this case, and you might be able to keep the net credit premium collected when the position was established.

The purpose of the long positions in spreads is partially to cover the short position, and, in the case of bullish long call spreads, to reduce the net amount paid for the long position. The long call calendar spread can make an unlimited amount of money if the price starts to go up after the short position has expired, because at that point the investor would only hold a long call position.

Investors can use this strategy if they believe that an event or news in the future will drive the price of the underlying up, but that nothing significant will happened in the near-month time frame. The investor can then purchase the long position at a price discounted by the premium collected for the short position.