Setting Up A Spread Using The Stock Ford As A Example

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First here is Ford's Five Day Chart.
Now a look at two series of Calls, one that expires this Friday (today is a Monday) and one series that expires the following Friday.
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Notice the open interest in this weeks Calls are a lot greater than the open interest in next weeks Calls. Short term option players usually don't think two weeks out. Now imagine purchasing ten of next weeks Call at $.40 each or $400.00 and selling against them ten of this weeks Calls for $.31 or $310.00. Your net investment would be $90.00 plus the commissions on two trades. In a perfect world you would then like to see the near term Calls drop to zero and expire worthless and then have Ford next week out Cal options shoot back up again in price on the following week. Now an August 19th review which happens to be a Wednesday. These short term Calls have jumped from $.40 to $.52. Now a Thursday suprise. Ford falls big time wiping out the value of the short term calls.
Here is a chance to buy them back for one dollar a contract to close out that half of the equation. Remember you first sold them for $.31. That sale becomes a locked in gain of $.30 or $300.00 on ten contracts. Now we are left holding ten of the next weeks series of Calls. Here is how they are now trading.
Remember you bought them at $.40 or $400.00 for ten contracts? If you sell them now you will take a loss of $130.00 dollars. Your net gain from this experience will be $170.00 less the cost of four commissions. It kind of makes sense because the short term Calls get beat up more than the next week out options. What can you do with these profits? Go wild and buy ten of the $14.00 contracts that expire tomorrow.
... Let's see what happens.

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