Double Diagonal Calculator
A double diagonal sells a near-term out-of-the-money call and put and buys longer-dated, further-out-of-the-money call and put. It is a neutral income strategy: the short near-term options decay fast in your favour while the long-dated options cap the risk and can be kept after the front month expires.
Interactive calculator
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Key characteristics
- Sell a near-term OTM call + put, buy longer-dated further-OTM call + put.
- Profits from near-term time decay while the stock stays range-bound.
- The long-dated options define the risk and survive the front-month expiry.
- A two-sided, income-oriented cousin of the calendar and diagonal spreads.
When to use a double diagonal
Use it when you expect a calm, range-bound stock and want to harvest premium on both sides at once. It is essentially a call diagonal and a put diagonal run together, so you collect time decay above and below the price while the back-month options provide protection and residual value.
After the near-term options expire you are left holding the long-dated call and put — you can close them, or roll new short options against them for another cycle of income.
Risks and management
The position is long volatility on the back month but short volatility on the front, so it is sensitive to how implied volatility shifts between the two expirations. A sharp move, or a large IV change, can turn the trade against you.
Risk is defined but not trivial to picture, because the long options still carry time value at the near-term expiration. Model the payoff at the front-month expiry (as this calculator does) before committing, and have a plan to adjust if the stock leaves the range.
Calculate it live
Use the free OptionProfit Double Diagonal calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.
- Sell near-term OTM call + put, buy longer-dated further-OTM call + put.
- Earns from front-month time decay on a range-bound stock.
- The long-dated options cap the risk and can be reused after the front expires.
- Sensitive to volatility shifts between the two expirations — model it first.
Frequently asked questions
What is the difference between a double diagonal and an iron condor?
An iron condor uses one expiration for all four legs; a double diagonal buys the protective wings in a later expiration. That longer-dated protection retains value and can be kept after the near-term options expire, but adds volatility sensitivity.
When does a double diagonal make money?
When the stock stays range-bound through the near-term expiration, so the short call and put decay while the long-dated options hold their value. Stable or mildly falling implied volatility helps.
Can I reuse the long options?
Yes — that is part of the appeal. Once the front-month options expire you can sell new short options against the surviving long-dated call and put for another income cycle.
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