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training_data/relevant/text/ac4b05de41716e85a3fca067aa2a6bda43003cc252b57e1da6083990a3828707.txt

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+Diagonals
+Definition : A diagonal spread is an option strategy that involves buying one
+option and selling another option with a different strike price and with a
+different expiration date. Diagonals are another strategy in the time spread
+family.
+Diagonals enable a trader to exploit opportunities similar to those
+exploited by a calendar spread, but because the options in a diagonal spread
+have two different strike prices, the trade is more focused on delta. The
+name diagonal comes from the fact that the spread is a combination of a
+horizontal spread (two different months) and a vertical spread (two different
+strikes).
+Say it’s 22 days until January expiration and 50 days until February
+expiration. Apple Inc. (AAPL) is trading at $405.10. Apple has been in an
+uptrend heading toward the peak of its six-month range, which is around
+$420. A trader, John, believes that it will continue to rise and hit $420 again
+by February expiration. Historical volatility is 28 percent. The February 400
+calls are offered at a 32 implied volatility and the January 420 calls are bid
+on a 29 implied volatility. John executes the following diagonal:
+Exhibit 11.11 shows the analytics for this trade.
+EXHIBIT 11.11 Apple January–February 400–420 call diagonal.