Real Example (July 2025)
A long call diagonal spread involves buying a longer-term call at a lower strike and selling a shorter-term call at a higher strike. It benefits from time decay and upward price movement over time.
- Stock: XYZ Corp
- Outlook: Moderately bullish short- to mid-term
- Setup: Buy 1 XYZ $95 Call (Oct) @ $6.00; Sell 1 XYZ $105 Call (Aug) @ $2.20
- Net Debit: $3.80 ($380 per contract)
- Max Loss: $380
- Max Gain: Varies with movement and volatility
- Ideal Stock Price at Aug Expiration: Close to $105