Double Diagonal

A near strangle sold against a wider far-dated strangle bought: two diagonals at once, one on each side of the underlying.

Also called Double diagonal spread

Outlook

Neutral

Family

Diagonal

Level

Expert

Legs

4 legs

Expirations

2 expirations

Opens for

Debit

Maximum profit

Limited

Maximum loss

Limited

Legs at the reference strikes this page's diagrams are drawn from

Leg	Side	Contract	Ratio	How the strike is chosen
B	Short	Put 92.5	1	Delta 16
A	Long	Put 87.5	1	5.00 points further out of the money than B
C	Short	Call 107.5	1	Delta 16
D	Long	Call 112.5	1	5.00 points further out of the money than C

What it is

Four legs across two expirations: a put sold at B and a call sold at C in the near month, with a put bought at A and a call bought at D further out in both strike and time.

It is a call diagonal and a put diagonal held together, and it resembles an iron condor whose wings sit in a later expiration. The fact box marks it Expert because it combines every complication in this encyclopaedia at once: four legs, two expirations, and a short pair inside a long pair.

The payoff

At expiration

A broad mound between the two short strikes, falling away outside them, valued when the near contracts expire.

⛔ Read at the near expiry, with both far-dated wings still alive. The position is worth most when the underlying is between the two short strikes and they expire worthless, leaving two long options that still carry time value.

Both the gain and the loss are bounded, and the maximum loss is the net debit.

How it behaves before expiration

Today, before expiration

Today's value is a flatter version of the same mound, with the same broad centre.

The mound builds toward the front expiry, as with any calendar structure.

The Greeks

Delta is near zero when the structure is centred.

Gamma is negative around the two short strikes.

Theta is positive: two near contracts decaying against two far ones.

Vega is positive, and this is what separates it from an iron condor. A condor is short vega; a double diagonal is long it, because its long legs sit in a later expiration.

Where it lives in the volatility environment

Practitioners describe it as an iron condor that wants implied volatility to rise rather than fall, and analyse it on term structure: the position benefits when the near expiry is expensive relative to the far one. That single difference in vega sign is the usual reason for choosing it over a condor.

What can go wrong

• Four legs and two expirations is the most moving parts of any structure here, and every one of them has to be closed or rolled.
• A move through either short strike before the near expiry turns the structure into a diagonal with an unwanted direction.
• Early assignment on either short leg, leaving shares against a far-dated option.
• The back legs survive the front expiry and become a long strangle that has to be managed.
• Eight crossings to open, eight to close, across two months’ liquidity.

Building it in Option Panel

Open Build Strategy and pick Double Diagonal. The two near short strikes are selected by delta or exactly; each far wing is expressed as an offset from its short leg, and the far expiration is chosen once for both.

Back to the encyclopaedia · What-if analysis in the docs

Related strategies

• Iron Condor — the same shape in one expiration, and short vega instead of long.
• Call Diagonal Spread — one half of this structure.
• Put Diagonal Spread — the other half.