What is it about a calendar spreads opposed to other spreads (e.g vertical spread) that makes it such a popular strategy for a period of low implied volatility?
Is it that when low volatility turns around and increases, somehow the long leg is supposed to increase in value while the short leg is supposed to remain unaffected or (even better) decrease in value?
Answer
The main thing to keep in mind with all these different option combination strategies is that you are really trading option greeks! I think the answer to why the calender spread is so popular lies in the special combination of gamma and vega risk:
Calendar spreads are the one type of trade where gamma can be negative while vega is positive (and vice versa of course). That means that while it is a an implied vol play you are still getting compensated for holding gamma risk (see variance risk premium). So while you are hoping for higher implied volatility you certainly want low realized volatility!
So putting it all together what you are hoping for is that while complacency should fade away (implied vol increase) there should still happen nothing really exceptional (low realized vol). This might be the way a lot of traders view many low vol environments (if they really understand what they are trading there which might not always be the case ;-)
If I may I would recommend a very good book on the subject:
Trading option greeks by Dan Passarelli
In that book you find everything about calender spreads on pages 201 ff.
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