A calendar spread, selling a front month option and buying a back month option at the same strike, is a great trade for a low implied volatility environment. Any expansion in volatility is going to be beneficial for this spread. To understand this, we need to remember how volatility affects option prices: an increase in volatility will raise option prices and a decrease in volatility will lower option prices. Therefore, it seems that any changes to volatility will essentially be a wash between your short and long options. However, the vega of a long-term option is higher than the vega of a short-term option. As a result, a pop in volatility will cause the profit on your long, back month option to exceed the loss on your short, front month option.
The max gain, loss, and breakeven point for a calendar is difficult to obtain with certainty because you have several moving parts impacting the value of the spread across different expiration cycles. Still, a good rule of thumb that Liz and Jenny use is to manage your calendar spread around a 25-30% of profit. So, if you paid $1.00 for your calendar spread, then you would consider taking it off when the spread reaches $1.25-$1.30.
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