Question: 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 value of the calendar (aka how much you can sell the spread for) if underlying trades at $102 one day later, BASED on theta/gamma/delta?