Horizontal Bull Call Diagonal – The Option Strategy Desk Reference

Horizontal Bull Call Diagonal

Strategy: Sell n ATM Calls, 56 DTE;

Buy n ATM Calls, Later Expiry

Example:

Price Chart: Uptrending

Current IV%: 20%

IV Rank: 30

Trade: Sell n ATM call options; Buy n ATM call options one expiration later.

Typical Strike Deltas:

Long Call 0.50 (ATM)

Short Call 0.50 (ATM) shorter expiration

Goals: Theta reduces the premium of short call faster than the premium of the long call. Trade may be closed for profit within 1 or 2 days to 1 week.

Manage: As soon as the net premium increases, close the trade for profit. If the underlying rallies, close the trade as the premium of the long call increases faster than the premium of the short call loses premium value.

Profit: Close when profit is at or more than 30 percent (price near peak of witch’s hat).

Loss: Close for an 8 percent loss (in case of a price drop).