Diagonal Spread
Outlook: Bullish
Calendars and diagonals
Different strike, different expiration. A vertical and a calendar combined.
Max profit
Variable, depends on long leg value at short leg expiration.
Max loss
Net debit paid.
Breakeven
Variable, computed at the short leg expiration.
Legs
Long
1×
call
ATM −5
Short
1×
call
ATM +5
Structure
Long 1 deeper-ITM long-dated call + short 1 OTM short-dated call.
When to use
Directional bullish view over weeks-to-months with theta financing. Capital-efficient covered call replacement.
Example
SPY at $450. Long 445 call 90 DTE $12, short 455 call 30 DTE $4. Debit $8. Roll the short leg monthly while the long delta carries the directional bet.
Notes
- "Poor man's covered call" is a specific diagonal. Roughly 8x capital efficiency vs real covered calls.
Build it in the simulator
Open this structure in the app, adjust spot, IV, and DTE, and watch the payoff and Greeks move.
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