Short call Diagonal Spread in Options trading - Stock market technical analysis #shorts #krinu

Short call diagonal spread here in this case we have selected Strike values of the underlying (Nifty) as:

Leg-1 has a lower strike value (19800) compared to Leg-2 strike value (19850) and expires 60 days from the current date

Leg-2 has a higher strike (19850) and expires 28 days from the current date

Hence these strikes and expiry's are selected keeping in mind the Outlook to be :

1. Moderately bullish (underlying (Nifty) trading between breakevens of leg-1 & Leg- 2 at expiry) yielding a Maximum profit since both the Leg's end up in a profit

2. Bearish (Underlying (Nifty) trading below the breakeven of Leg-1 and Leg-2 at expiry) yielding a limitted profit , in this example discussed its 516 - 240 = 276 (since the call sold ends in profit , but the call bought ends up in a loss) multiplied by the lot size

Construction of this Example shown makes a loss when its:

Extremely bullish (Underlying (Nifty) trades above the breakevens of both the Leg's at expiry) resulting in a overall Loss , in this Example disussed its 240-516 = -276 (since the Call sold ends up making a loss , but the Call bought ends up in a profit ) Multiplied by the Lot size

Note: The strikes can be selected accordingly to make this strategy Extremely bullish too , for instance the investor can select a higher strike for long term Call Sold and lower strike for the Short term Call option bought based on his plan and outlook for the Underlying (Nifty here).
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