Calendar Put

Calendar spreads are known as horizontal spreads, and the Calendar Put is a variation of a Calendar Call where you substitute the calls with puts.
Both options share the same strike, so if the stock rises above the strike, your short put will expire worthless, whereas your long put will be less valuable because it’s now further OTM.
If the stock falls, the short put will be exercised, and you’ll then have to sell the long put (hopefully for a profit), use the proceeds to sell the stock at the market price, and then buy it back at the strike price.
Buy a long-term expiration put with a near the money strike price.
Sell a short-term put (say monthly) with the same strike price.

Outlook

With a Calendar Put, your outlook is neutral to bullish. You expect a steady rise.

Rationale

To generate income against your longer term long position by selling puts and receiving the premium.

Net Position

This is a net debit transaction because your bought puts will be more expensive than your sold puts, which have less time value.
Your maximum risk on the trade itself is limited to the net debit of the bought puts less the sold puts.
Your maximum reward is limited to the residual put value when the stock is at the strike price at the first expiration, less the net debit.

Effect of Time Decay

Time decay affects your Calendar Put trade in a mixed fashion.
It erodes the value of the long put but helps you with your income strategy by eroding the value faster on the short put.

Time Period to Trade

You will be safest to choose a long time to expiration with the long put and a short time for the short put.

Breakeven Down = Depends on the value of the long Put option at the time of the short call expiration

Breakeven Up = Depends on the value of the long Put option at the time of the short call expiration

Steps In

Try to ensure that the trend is upward or range bound and identify clear areas of support and resistance.

Steps Out

Manage your position according to the rules defined in your Trading Plan
If the stock closes below the strike at expiration, you will be exercised. You will sell your long put, buy the stock at the strike price, and sell it at the market price, having profited from both the short option premium you received and the uplift in the long option premium.
If the stock rises above the strike but above your lower stop loss, let the short put expire worthless and keep the entire premium.
If the stock rises above your higher stop loss, then either sell the long option (if you’re approved for Naked Put writing) or reverse the entire position.

Exiting the Position

With this strategy, you can simply unravel the spread by buying back the puts you sold and selling the puts you bought in the first place.
Advanced traders may leg up and down as the underlying asset fluctuates up and down.
In this way, you can take incremental profits before the expiration of the trade.

Mitigating a Loss

Unravel the trade as described previously.
Advanced traders may choose to only partially unravel the spread leg-by-leg.
In this way, they will leave one leg of the spread exposed in order to attempt to profit from it.

Advantages

Generate monthly income.
Can profit from range bound stocks and make a higher yield than with a Covered Call or Naked Put.

Disadvantages

Capped upside if the stock rises.
Uncapped downside—you can lose more than your net debit with this strategy.
Can lose on the upside if the stock rises significantly.
High yield does not necessarily mean a profitable or high probability profitable trade.

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