Sell a nearer-dated option and buy a further-dated one at the same strike. The near leg decays faster, so time passing benefits the position — the mechanic in calendar spreads.

What the daily cycle changes

The near leg can be extremely short-dated, so its decay is very fast in absolute terms. That is the attraction, and it comes with the near leg having very high gamma — meaning it responds violently to spot moving through the strike.

A short near-dated option near the money is the single most reactive position in options. The calendar spread contains one by construction, and the further-dated long leg does not offset that reactivity anywhere near fully because its gamma is much lower.

So a crypto calendar needs managing on a much shorter timescale than a monthly-cycle one, and a position left unattended through a move can go wrong faster than the structure suggests.

What it is really trading

The shape of the term structure, not its level. The position profits when the near leg’s implied volatility falls relative to the far leg’s — so it is a view on the front end being expensive relative to the back, which is exactly the thing term structure shows.

Which makes it a genuinely structural trade rather than a directional one: you are selling the part of the curve that is bid and buying the part that is not.

The crypto-specific opportunity

The front end of the crypto curve is unusually reactive, because a daily expiry prices whatever is happening right now with almost no time to average it out. It spikes on news and normalises quickly.

That reactivity is what a calendar is designed to harvest. It is also why the trade is uncomfortable: you are short the leg that spikes, and the spike arrives before the normalisation does.

The liquidity check first

Both legs need to be tradeable at reasonable spreads, and beyond the majors and the main expiries that is not a given — see liquidity by strike. A structure that looks profitable on mid prices and requires crossing two wide spreads to enter and two more to exit frequently is not profitable at all.