Diagonal Call Spread
Buy a longer-dated ITM Call and sell a shorter-dated OTM Call across different expiration cycles to exploit time decay differential.
Interactive Payoff Curve & Greeks Simulation
Visualize the theoretical profit & loss at expiry vs T+0 immediate day curves. Drag the simulation slider to stress-test your trade.
Option Payoff Curve & Greeks
Net Option Greeks (Sensitivity Profile)
Values per 1 Lot standard unitMulti-Leg Position Structure (2 Legs)
| Action | Instrument / Strike | Type | Expiry | Approx Delta | Est. Premium | Qty Ratio |
|---|---|---|---|---|---|---|
| BUY | 1,500 CE (ITM) | CALL | 60 DTE Expiry | +0.65 | ₹95 | 1x |
| SELL | 1,600 CE (OTM) | CALL | 15 DTE Weekly | +0.30 | ₹22 | 1x |
How the Structure Works
Theta decay is non-linear: options lose extrinsic value fastest in their final 14 days. By selling 14-day options against 60-day options, you harvest high theta differential.
A Diagonal Call Spread combines a Calendar Spread and a Vertical Spread across different strikes AND different expiration dates. The front-month OTM short call decays rapidly to zero, providing weekly cash flow while your back-month ITM long call rides the multi-month trend.
Institutional Strike Selection Rules
Phased Execution Blueprint
Follow this structured sequence to eliminate emotional hesitation during order entry, lifecycle management, and final exit.
Multi-Month Trend
Deploy on stocks in solid multi-month uptrends.
Interactive Margin & Position Size Calculator
Calculate exact lot sizing based on the 1-2% risk rule to preserve capital against Black Swan events.
Options Position Size & Max Risk Calculator
Total net liquid equity in your brokerage account
Recommended: 1.0% - 2.0% for disciplined longevity
Wing width max loss or defined mental/system SL
Rigorous Risk Rules & Adjustment Protocols
Non-negotiable parameters for stop-loss triggers, portfolio caps, and firefighting adjustments when market tests your strikes.
- Roll short call to next weekly cycle when expired worthless.
SEBI allows calendar margin relief.
INFY Diagonal Spread Trade Walkthrough
Infosys began multi-week bounce.
Bought 60-day 1500 CE @ ₹95 / Sold 15-day 1600 CE @ ₹22 (Repeated twice)
- Collected 2 rounds of weekly short premium.
Common Mistakes to Avoid
Why it happens: Creates inverted diagonal with upside risk.
Solution: Always sell short call higher than long call.
Institutional Pro Tips
Diagonal Call Spread FAQs
What happens when the short call expires worthless?
You keep 100% of the short premium and sell another short call for next week against your long call.
Alternative & Complementary Strategies
Replace owning 100 expensive stock shares with a deep ITM LEAPS Call (>80 Delta), then continuously sell short-term OTM Calls for recurring income.
Sell a short-dated option and buy a longer-dated option at the same strike to exploit rapid near-term time decay with low capital risk.
Buy an ATM Call and simultaneously sell a higher OTM Call to reduce cost, cap risk, and neutralize theta decay.