In
derivatives trading, the term diagonal spread is applied to an
options spread
Options spreads are the basic building blocks of many options trading strategies. A spread position is entered by buying and selling options of the same class on the same underlying security but with different strike prices or expiration dates. A ...
position that shares features of both a
calendar spread
In finance, a calendar spread (also called a time spread or horizontal spread) is a spread trade involving the simultaneous purchase of futures or options expiring on a particular date and the sale of the same instrument expiring on another date ...
and a
vertical spread
In options trading, a vertical spread is an options strategy involving buying and selling of multiple options of the same underlying security, same expiration date, but at different strike prices. They can be created with either all calls or all ...
. It is established by simultaneously buying and selling equal amount of
option contract
An option contract, or simply option, is defined as "a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer". Option contracts are common in professional sports.
An option contrac ...
s of the same type (
call options or
put options) but with different
strike price
In finance, the strike price (or exercise price) of an option is a fixed price at which the owner of the option can buy (in the case of a call), or sell (in the case of a put), the underlying security or commodity. The strike price may be set ...
s and expiration dates.
Example
External links
*http://www.thestreet.com/story/10080609/1/real-world-trading-the-diagonal-spread.html
Short Diagonal Call/Put Credit Spreads
{{DEFAULTSORT:Diagonal Spread
Options (finance)