If you’re already treating your trading like a business, the next logical step is to build a strategy playbook that supports that mindset. One powerful and often overlooked addition to your arsenal? The diagonal spread strategy.
Diagonal spreads combine elements of both vertical and calendar spreads to offer defined risk, flexible profit zones, and smart capital deployment—exactly the kind of tools a business-minded trader needs.
At its core, a diagonal spread involves:
Buying a longer-dated option (either a call or a put)
Selling a shorter-dated option at a different strike price
Because the strikes are different (like a vertical) and the expirations are different (like a calendar), this hybrid strategy offers some unique benefits.
Just like a successful business relies on recurring revenue and controlled expenses, the diagonal spread reflects the same smart structure. It allows traders to collect premium from the short leg, benefit from defined risk through the long leg, and maintain flexibility to adjust the position as needed. The strategy supports the principles of planning, managing, profiting, and reinvesting—essential habits for trading like a business.
Diagonal spreads work well when you have a mild directional bias, want to take advantage of theta decay, and prefer defined-risk trades with room for adjustments.
For example, if you’re slightly bullish on SPY, you could buy a 60-day call at the 420 strike and sell a 7-day call at the 430 strike. As long as SPY stays under the short strike, you can roll that leg week after week, collecting premium and managing the position along the way.
As with any smart business move, risk management is essential. Diagonal spreads offer limited downside (the net debit you paid) and provide multiple ways to manage trades—like rolling or closing the short leg, or adjusting based on market movement or implied volatility changes. Clear rules around max loss per trade or total portfolio exposure help protect your capital and keep your “business” running long term.
ZEBRA (Zero Extrinsic Back Ratio) spreads have exploded in popularity because of their near-delta-1 exposure without tying up tons of capital. But they’re not always the best fit—especially if you want to lower cost or reduce directional exposure.
Enter diagonal spreads: a natural complement to the ZEBRA mindset. They’re particularly effective for earnings plays, volatility skew exploitation, and traders who want to simulate ZEBRA-like setups but with less capital and more theta decay potential.
Let’s say you’re bullish on NVDA over the next 2–3 months. Rather than buying a long call outright, you enter a diagonal: buy the 90-day 130 call and sell the 10-day 145 call. This reduces your cost basis and allows you to bring in consistent premium—mirroring the income mindset of a smart business.
Just like business owners thrive in peer networks, traders accelerate their growth when they’re part of a like-minded community. That’s why we created the Dorian Trader Trading Club—a space where serious options traders share strategies, market insights, and real-time trade ideas. From ZEBRAs to diagonals and everything in between, you’ll gain weekly trade breakdowns, live sessions with veteran traders, and a trusted space to ask questions and share your wins.
Every business owner knows they can’t rely on a single product. Similarly, traders shouldn’t rely on just one strategy. Diagonal spreads are an excellent addition to your strategy mix. They offer diversification, defined risk, and consistent opportunity.
If you want to accelerate your progress, join a community that helps you think—and trade—like a professional.
Ready to explore diagonal spreads and other pro-level strategies? Join the Trading Club and learn from traders who treat it like a business.
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