Long Diagonal Bull Call Spread

Usage scenarios

When you expect the stock price to rise moderately, you can use subscription short diagonal bull put spread.

How to build

• Sell recent month's call options with high trading prices

• Buy a long-month call option with a lower trading price

The underlying assets and quantity of the two options are the same.

Strategy brief

The short diagonal bull put spreadns is to simultaneously profit from the loss of time in recent months and the rise in asset prices in the past month.

Ideally, after an investor opens a position, the price of the underlying asset fluctuates smoothly and remains between the two exercise prices until the option expires in recent months.

After the recent month's options expired, the strategy left only long positions with long-month call options. If the underlying asset starts to rise sharply at this time, investors can profit twice.

In this strategy, the price of a recent bullish option with a high trading price is theoretically less than the price of a long-month bullish option with a lower trading price, so there was an outflow of capital at the beginning of the strategy's establishment.

After the recent month's options expire, you can choose to simultaneously close one-month options or open other options to form a new option strategy according to different market conditions.

Furthermore, when other conditions are equal, the size of the price difference between the two exercise prices, the length of the date difference, and volatility together determine the size of potential profits and losses.

Overall, this is an advanced strategy that requires comprehensive dynamic consideration of the three dimensions of direction, time value, and volatility, and is not suitable for novice options users.

Risks and benefits

Maximum benefit: Limited. Maximum profit is achieved if the stock price is equal to the recent month's exercise price on the maturity date of the recent month. This is a dynamic value, which depends on the dynamic value of the long-month option at this time, and this price is affected by volatility and cannot be confirmed in advance.

Maximum loss: The option premium spent.

Break-even point: only one. It is located between the two exercise prices. It is also a dynamic value, determined by the price of the long-month option when it expires in the recent month.