The Diagonal spread is a hybrid trade or specialty options spread, which can be a powerful tool to add to your options tool box! The strategy is often overlooked by newer traders as it can seem confusing and is not well understood or widely used, but It can be multi-functional trade. In most cases it can have “one way” risk, meaning very little to no risk on one side or the other.
In most cases it can be set up for very little to no actual “cost” other than margin, and is an incredibly flexible trade. It can be set up to be neutral, bullish or bearish, depending on your outlook.
It is also an incredibly useful trade that is unique because it can be set up to be a directional trade with positive theta, which is a very powerful feature!
In this class, I will walk you through:
- The setup, step-by-step, and show you how to use it and,
- WHEN to use it and when NOT to use it
No other trade is as flexible as the Diagonal Spread for multi-functional use.