What is a diagonal spread in options trading?

The diagonal spread is a popular options trading strategy that involves the simultaneous purchase and sale of options of the same type but with different strike prices and expiration dates. This spread aims to benefit from the advantages of both vertical and calendar spreads.

Is a diagonal spread a bullish strategy?

This strategy can lean bullish or bearish, depending on the structure and the options utilized. A diagonal spread is an options strategy that involves buying (selling) a call (put) option at one strike price and one expiration and selling (buying) a second call (put) at a different strike price and expiration.

What are the risks of a diagonal spread?

However, it is important to note that, like all options trading strategies, the diagonal spread carries associated risks, such as losing money if the underlying security does not perform as expected. Additionally, traders may incur higher fees than other strategies, as they effectively buy and sell two options contracts. What Is A Diagonal Spread?

What is the difference between calendar spread and diagonal spread?

The main difference between the calendar spread and the diagonal spread lies in the near term outlook. The employer of the diagonal spread has a near term outlook that is slightly more bullish or bearish.