Call Diagonal Calculator

A call diagonal buys a longer-dated call at one strike and sells a shorter-dated call at a higher strike. It combines a calendar, which profits from the short option decaying faster, with a vertical spread, which profits from direction. The usual version is bullish: the long call is at or below the price, and the short call is sold above it.

When it is used

Traders use diagonals to express a view that a stock will rise gradually toward a level over a few weeks, while collecting premium along the way. The short call is often renewed each month against the same long call, which is the structure of a poor man's covered call when the long leg is deep in the money and far out.

How it makes and loses money

A steady rise toward the short strike by the short expiry is the best case. Time decay helps while the stock is near or below the short strike. A sharp rally past the short strike can produce a loss near the short expiry, because the short call gains faster than the long one. A fall costs money on the long call, capped at the net debit.

What to check in the grid

The columns around the short call's expiry show a profit that peaks near its strike and falls away above it. After that date the position becomes a plain long call. Compare the two expiry columns to see the position change shape.