What is a diagonal call calendar spread?

The diagonal call calendar spread is a more complex option strategy dedicated to the more advanced traders. The paradox behind this strategy is that you need the price of the stock to be relatively stable, but you also want some volatility in-between the expiration dates so you can profit from the diagonal call calendar spread.

What is a diagonal spread in options trading?

A diagonal spread is an options trading strategy that combines the vertical nature of different strike selections in a vertical spread, with the horizontal nature of different contract durations in a calendar spread. Diagonal spreads are typically set up like vertical debit spreads, where the long option has a longer duration than the short option.

What is a calendar spread?

In a typical calendar spread, one would buy a longer-term contract and go short a nearer-term option with the same strike price. If two different strike prices are used for each month, it is known as a diagonal spread . Calendar spreads are sometimes referred to as inter-delivery, intra-market, time spread, or horizontal spreads .

What is the difference between a vertical spread and a diagonal spread?

A vertical spread’s long and short options share the same expiration, whereas a diagonal spread’s long and short options are in different expirations. Typically, the long option has more time to expiration than the short option.