From Theory To Practice - January 12, 2021 - Diagonal Spread Setups
Generally, we prefer to sell premium and assume the short side of the option contract. By doing this, we can benefit from high probabilities and positive theta. However, there are times during low IV environments when buying premium with a debit strategy is a viable option. In these instances, one of our favorite strategies is the Diagonal Spread.
Diagonal Spreads allow you to blend the characteristics of a Vertical Spread with a Calendar Spread - yielding both a time component and a directional component to your strategy. Today, we walk through how to set these strategies up, as we look to add one in TLT to our portfolio.