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Diagonal Spread

Bullish Strategy

Use Zuviz's free options visualizer to build this strategy instantly. Different strikes AND different expirations. Combines directional bias with time decay benefits.

⚡ Key Takeaways

  • Market Outlook: Moderately bullish with time advantage
  • Max Profit: Varies based on time decay and price movement
  • Max Loss: Net debit paid to establish position
  • Breakeven: Dynamic (changes as time passes)
  • Best for: Capturing time decay differential between expiration cycles
  • Greeks Impact: Positive Theta on short leg, complex Delta exposure

💡 Visualize this strategy in 10 seconds: Open Zuviz →

Market Outlook
Moderately Bullish
Max Profit
Varies (depends on IV)
Max Loss
Net Debit
Breakeven
N/A

📊 Payoff Diagram

Open in Zuviz →

🏗️ Strategy Structure

Leg Action Type Strike Expiration Premium
1 Buy Call $95 (ITM/ATM) 60 DTE $8.00
2 Sell Call $105 (OTM) 30 DTE $2.00

Net Debit: $8.00 - $2.00 = $6.00/share ($600/contract)

🧮 Key Calculations

🎯 When to Use This Strategy

  • Gradual bullish: Expecting slow rise to short strike over time
  • Reduce cost: Short call offsets cost of long call
  • Roll potential: Can roll short call weekly for income
  • IV play: Benefit from rising IV in back-month option

📈 Greeks Impact

Delta (Δ)

Positive - You want the stock to rise.

Theta (Θ)

Negative (usually) - Time decay hurts long positions, helps short ones.

Vega (ν)

Depends - Long strategies want rising IV, short strategies want falling IV.

⚖️ Pros & Cons

Pros

  • Time decay works for you
  • Lower cost than owning stock
  • Leverage

Cons

  • Capped upside (usually)
  • Complexity to manage
  • Risk of early assignment

📝 Real-World Example

Stock: AAPL at $150. Trade: Buy LEAP $130 Call, Sell Monthly $155 Call.

Goal: Generate income while holding long-term Call.

🔗 Related Strategies

📅 Calendar Spread

Same strike, different expirations

📊 Call Ratio Spread

Different ratio approach

Visualize This Strategy

See the payoff diagram in Zuviz.

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