Diagonal spread
Combines a vertical and a calendar spread. Buy a long-dated option at one strike, sell a shorter-dated option at a different strike. Common in poor-man's covered call setups.
INPUTS
Underlying price
$
Centers the payoff chart and computes P&L at this price.
LEGS
Short near-term
Type
Side
Strike
$
Qty
Premium
$
Long far-term
Type
Side
Strike
$
Qty
Premium
$
RESULT
$60.002 strikes$140.00
P&L at current spot (expiry)
−$250
Net debit−$250
Max profitUnlimited
Max loss−$250
Note: Profit zone depends on stock position at near-term expiration.
RISK PROFILE
Max profit
Variable — depends on stock at near-term expiry
Max loss
Net debit paid (for debit diagonals)
Breakeven
Complex — depends on time and IV
RELATED STRATEGIES
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