diagonal spread

Diagonal Spread

An options strategy established by simultaneously entering into a long and short position in two options of the same type (two call options or two put options) but with different strike prices and expiration dates.

Notes:

This strategy is called a diagonal spread because it combines a horizontal spread, which represents the difference in expiration dates, with a vertical spread, which represents the difference in strike prices. An example of a diagonal spread is the purchase of a December $20 call option and the sale of an April $25 call.

See also: Expiration Date, Horizontal Spread, Long, Option, Short, Spread, Strike Price, Vertical Spread

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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.

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diagonal spread

Any spread with different strike prices in which the purchased options have a longer maturity than the written options.