Diagonal Spread is a spread that is created through the simultaneous purchase and sale of two calls or two puts on the same underlying security that differ in both strike price and expiration months.
A diagonal spread consists of one long option and one short option of the same class that have different strike prices and expiration months. The position is called a diagonal spread because of the way the options are listed in the option chain or in the newspaper.
Example:
Short 1 TRY June 50 call
Long 1 TRY August 40 call
A diagonal spread could also be established using puts
Short 1 TRY March 40 put
Long 1 TRY August 50 put
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