Strategy Overview
Medium RiskAdvancedNeutral
A double diagonal combines two diagonal spreads - one put diagonal and one call diagonal. You sell near-term options at one set of strikes and buy longer-term options at wider strikes.
Max Profit
Variable - depends on IV and time decay
Max Loss
Net debit paid
Breakeven
Varies with strikes, time, and IV changes
Probability
~50% win rate
hist. est.
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Example Setup Calculator
$
Debit Paid
$200
Max Profit
$300
Max Loss
$200
Breakeven
$102.00
Strategy Components
BUY OTM PUT
Buy longer-term OTM put
SELL OTM PUT
Sell near-term OTM put
SELL OTM CALL
Sell near-term OTM call
BUY OTM CALL
Buy longer-term OTM call
When to Use
- You expect the stock to stay in a range short-term
- You want exposure to time decay and IV changes
- You want more flexibility than an iron condor
- You expect IV to increase
Best Market Conditions
- Range-bound short-term
- Expected IV increase
- Two clear price levels identified
Best Practices
- Front month 30 DTE or less, back month 60+ DTE
- Place short strikes at expected range boundaries
- Close before front expiration
- Monitor vega exposure carefully
Ready to Trade?
Review Double Diagonal and practice it in paper trading with the school workflow.
Paper Trading