Value-Trades

Short Put Diagonal Strategy: Real Trade Example


Real Example (July 2025)

A short put diagonal involves selling a longer-term put at a lower strike and buying a shorter-term put at a higher strike. It's designed for neutral-to-slightly bullish outlooks with income potential.
  • Stock: XYZ Corp
  • Outlook: Slightly bullish or sideways
  • Setup: Sell 1 XYZ $90 Put (Oct) @ $5.50; Buy 1 XYZ $100 Put (Aug) @ $2.30
  • Net Credit: $3.20 ($320 per contract)
  • Max Gain: $320 if stock stays above $100
  • Max Loss: Significant if stock drops below $90
  • Note: Margin required; risk increases as price falls

Outcomes

Stock Price at Aug Expiration Short Put Value Long Put Value Net Value Profit/Loss
$105 $0 $0 $0 +$320
$100 $0 $1.50 -$1.50 +$170
$90 $10.00 $0.00 -$10.00 -$680

Compare With Long Put Diagonal Strategy →

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