diagonal spread

Diagonal spread

An options strategy requiring a long and a short position in the same class of option at different strike prices and different expiration dates. For example, buying an XYZ April 50 call and selling an XYZ July 55 call. See: Calendar spread; vertical spread.

Diagonal Spread

An option strategy in which one enters into a long position on a call (or a put) while taking a short position on another call (or put) with the same underlying asset, but with different strike prices and expiration dates. One gains (or loses) on the change in the spot price of the underlying asset over the life of the spread. It derives its name from the fact that it shares features with a vertical spread (where the calls or puts have different strike prices) and a horizontal spread (where they have different expiration dates).

diagonal spread

Any spread with different strike prices in which the purchased options have a longer maturity than the written options.
References in periodicals archive ?
STOCK SYMBOL RESULTS STRATEGY (Nasdaq:LGTO) 130% short-term volatility spreads (NYSE:GTS) 100% short-term volatility spreads (NYSE:MTC) 84% two-week disparity spread (Nasdaq:AWRE) 40% bullish diagonal spread (Nasdaq:CSCO) 40% bullish diagonal spread (Nasdaq:CMGI) 53% bull-call spread (Nasdaq:ATHM) 42% bull-call spread (Nasdaq:QCOM) 34% bull-call spread (Nasdaq:DELL) 25% bull-put spread (NYSE:LTD) 25% bull-put spread (Nasdaq:VISX) 14% bear-call spread (NYSE:CHA) 11% bull-put spread
Olmstead and team recommend a diagonal spread trade that can evolve into a simple long call play after the August options expiration date.
In order to offset some of the cost of a June call, an April call will be sold to form a very short-term diagonal spread.
Edward Olmstead's diagonal spread trade initiated on 4/6/04:
Investors employing a diagonal spread typically think the underlying will remain flat or rise only slightly in the near term, but will fall over the longer term.
In our Options Update podcast, Jon Lewis mentioned a possible diagonal spread on the AMEX Semiconductor HOLDRS Trust (SMH).
Agreement in the quantitative data was determined using diagonal bias (m), diagonal spread (d), diagonal SD (dsd), diagonal correlation ([r.
This is likely a diagonal spread at work, given the different expiration dates and strike prices (but the similarity in block size and timing).
The equity's options pits were unusually active on Tuesday, as a diagonal spread was initiated between the October 25 put and the January 20 put.
Other top positions by category included: Diagonal spreads, Chiron (NASDAQ:CHIR) a 47% return and Echostar (NASDAQ:DISH) at 25% profit; Bull-Put Spreads, IMS Health (NYSE:RX) with a 37% profit and RF Micro (NASDAQ:RFMD) at 25%; Bull-Call Spreads, Nielson Media (NYSE:NMR) at 60% profit and Sequent (NASDAQ:SQNT) at 58%, Bear Put Spreads; Thomas & Betts (NYSE:TNB) at 66% profit and IMS Health (RX) at 50%, Bear-Call Spreads; Honda Motors (NYSE:HMC) at 25% profit and The Equitable (NYSE:EQ) at 21%; Calendar spreads, International Paper (NYSE:IP) at 61% profit, and Straddles and Strangles; Vulcan (NYSE:VMC) at 34% profit.
All manner of spreads are covered, from calendar and horizontal spreads to vertical and diagonal spreads