Setup variants. Bullish diagonal: buy a long-dated ITM call, sell a near-term OTM call. Behaves like a directional PMCC. Bearish diagonal: buy a long-dated ITM put, sell a near-term OTM put. Net positive theta, modest directional exposure, vega-positive overall. Choose strikes based on your directional view; choose expirations based on how long you want to hold the structure.
Diagonals are more flexible than calendars but more complex to manage. The two legs can drift in opposite directions on big moves, producing P&L that requires active interpretation. Best for traders comfortable with multi-leg management. Avoid diagonals during high-IV-event windows — the IV expansion can move the long leg one way and the short leg another, creating awkward portfolio positions.