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