advancedMedium RiskNeutral
Double Diagonal
Combine a put diagonal and call diagonal. Profits from time decay and range-bound stock.
What is a Double Diagonal?
A double diagonal adds a put diagonal (for downside) to a call diagonal (for upside). You sell both a near-term OTM call and put, and buy longer-dated options at wider strikes for protection. It's like an iron condor with the protection legs pushed further in time.
When to use it
Use in moderate-to-high IV environments when you expect the stock to stay in a range. The diagonal structure means the long legs retain value better than in a standard iron condor.
Structure
Sell near-term OTM call + sell near-term OTM put + buy longer-dated OTM call + buy longer-dated OTM put.
Key Metrics
Max Profit
Net credit from short options plus value retained in long legs.
Max Loss
Limited by the long options — less than a naked strangle.
Breakeven
Two breakevens, similar to iron condor but wider due to the time value of long options.
Greeks Profile
Theta: positive. Delta: near zero if symmetric. Vega: net positive (back month vega > front month).
Tips & Best Practices
- 1Monitor both the short and long legs for roll opportunities.
- 2The long legs provide better protection than standard condor wings.
- 3Use when IV term structure is steep (back month IV cheap vs. front month).
- 4Close or roll before the short options approach expiration.
See it in action
Model a Double Diagonal with a real ticker. See the P&L chart, heatmap, and exact breakevens.
Open Double Diagonal Calculator →