In derivatives trading, the term diagonal spread is applied to an

options spread Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options' variables. Call options, simply known as Calls, give the buyer a right to buy a particular stock at that ...

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 da ...

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 p ...

. 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 relation to property (see below) and ...

s of the same type (

call option In finance, a call option, often simply labeled a "call", is a contract between the buyer and the seller of the call Option (finance), option to exchange a Security (finance), security at a set price. The buyer of the call option has the righ ...

s or

put option In finance, a put or put option is a derivative instrument in financial markets that gives the holder (i.e. the purchaser of the put option) the right to sell an asset (the ''underlying''), at a specified price (the ''strike''), by (or on) a ...

s) 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
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