A diagonal on each side of the market: short near-dated strangle, long further-dated strangle at wider strikes. An income structure with long vega.
Think of it as an iron-condor whose protective wings live in a later expiration. The short near-dated options decay fastest, while the long back-month options both cap the risk and give the position positive vega, so a volatility expansion helps rather than hurts.
That vega profile is the whole point. A standard iron condor is short volatility twice over — through theta and through vega — and gets hurt when implied-volatility rises even if price stays put. A double diagonal separates the two bets, at the cost of a more complex position and four legs of bid-ask-spread.
Example: XYZ at $50. Sell the 30-day $55 call and $45 put for $1.20, buy the 60-day $57.50 call and $42.50 put for $1.55, a $0.35 debit. The short strangle pays for itself over the month and you still hold protection into the next cycle.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Iron condor: payoff at expiry. Four strikes: the 2 credit is kept in full while the price finishes between 95 and 105, and is lost gradually outside the 93 and 107 breakevens. The bought 90 put and 110 call stop the loss at 3 on either wing.The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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