Long Call diagonal spread in options trading - stock market technical analysis #shorts #krinu

Long Call diagonal spread is a Bullish strategy the Investor makes a maximum profit when the Underlying (here Nifty) moves significantly higher , he ends up paying the premium as a Net Debit form his account

A diagonal spread incorporates Horizontal and vertical spreads; to make a hybrid out of these two which is called the diagonal spread, here the strikes are different ( like the vertical spread) also with different expiry's (like a Horizontal spread)

here in Long Call Diagonal spread the investor SELLS one OTM and BUYS One ATM Call Options for the same Underlying (Nifty) but with different Expiry's ; the first option usually is chosen to have the near term expiry (OTM CE) and the second one a long term Expiry (ATM CE) as shown here in this example as 23rd March & 29th March respectively

Case -1:
If the underlying (Nifty here) trades below the breakeven of Leg-1 and Leg-2

He makes an Overall loss as his Leg-1 Contract will be in profit but the Leg-2 contract will incur a loss so this ends up in a consolidated loss to the Investor

Case:2
If the Underlying (Nifty) trades between the break even of Leg-1 and Leg-2

He makes a Maximum profit on Expiry of both the contracts as both Leg-1 and Leg-2 expires in a profit

Case:3

If the underlying (Nifty) trades above the breakeven of Leg-1 and Leg-2

he makes a Limited profit as the Leg-1 contract expires in a Loss and the Leg-2 contract ends up in a profit ; hence he makes a Limited overall profit in this strategy

Call Diagonal Spread is a bullish strategy the investor implements this strategy in a view that the Underlying may go up significantly

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