Double Diagonal: Two Diagonal Spreads, One Position

A double diagonal combines a bullish diagonal and a bearish diagonal on the same underlying — selling near-term OTM call and put, buying longer-dated further OTM call and put. The structure resembles a long-dated iron condor with theta tilt.

Construction: sell 30 DTE OTM put and OTM call (the inner short legs); buy 60 DTE further OTM put and call (the outer long legs). Net debit, modest. Profits when the stock stays between the short strikes and IV expands. The structure is positive theta on the front month, positive vega on the back month — a rare combination that pays for both range-bound action and rising IV.

Management is more complex than an iron condor — the long legs need active monitoring as expiration approaches and the short legs roll. Best deployed when IV rank is low and you expect IV expansion plus range-bound price action — earnings season setup on stable stocks, post-event stabilization on names that just had IV crush. Not a beginner structure; understand calendars and diagonals individually before combining them.

Frequently Asked Questions

Double diagonal vs iron condor?

Iron condor is single-expiration, simple, defined risk. Double diagonal is multi-expiration, vega-positive, more complex. Choose iron condor for clean range trades; double diagonal when you want IV expansion exposure too.

How wide should the diagonal strikes be?

Wide enough to give the position breathing room — typically 5–10 points apart on a $200 stock, depending on IV level.

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