Bullish double diagonal
A double diagonal combines two time spreads. This mildly bullish version sells a NIFTY monthly put about 1% below the market and a call about 2% above it, and buys next-month options as cover: a put 100 points lower and a call at the same strike. The structure profits from the near-month options decaying faster than the next-month ones while NIFTY drifts sideways or slightly up.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
Thirteen trades are too few for firm conclusions, but the shape is clear. The five trades where NIFTY stayed within 1% while held made ₹8,625, as the near-month shorts decayed faster than the next-month longs, and the four where it rose more than 1% made ₹6,299. The four trades where NIFTY fell more than 1% lost ₹38,311 with no winners: the short put sits close to the money and its cover is a lower strike, so a fall hurts until the 2.25% stop closes the put side. Entries after quiet, narrow-range sessions lost ₹30,054 over 6 trades, while the 4 after trend days made ₹9,270. Figures are before costs.
About this strategy
- About four weeks before the near monthly expiry, at 09:30, note the NIFTY futures level.
- Sell the near-month put nearest 1% below the forward price and buy the next-month put about 100 points below it.
- Sell the near-month call nearest 2% above the forward and buy the next-month call at the same strike.
- If NIFTY futures fall 2.25% below the entry level, close both put legs; if they rise 3.75% above it, close both call legs. No other adjustments.
- Close everything still open at 15:15 one calendar day before the near-month expiry.
- Open one position per monthly cycle.
Why traders use it
Time spreads let a trader sell fast-decaying near-month premium while owning slower-decaying later options as protection, which needs less margin than naked selling. Placing the put closer and the call further out tilts the payoff towards a gentle rise, a common view for an index with a long-term upward drift. Separate stops on each side are meant to cap the damage from a big move without closing the half of the position that is still working.
The year in plain words
With default settings on NIFTY from 1 Oct 2025 to 30 Sep 2026, the strategy opened 13 positions and won 6. It lost ₹23,387 before costs, a profit factor of 0.58, with average losses of ₹8,038 about one and a half times the average win of ₹5,480. March (−₹12,639), September (−₹11,921) and November (−₹10,706) were the weakest months; the best trade, closed when the data ended, made ₹10,897. Twelve trades ended at the planned exit before the near expiry; the stops close only individual sides. After ₹20 per order and bid-ask slippage on four legs across two expiries, the loss grew to ₹31,459. In this period, the structure did not earn its keep.
What the settings do
Risks
- The put side's cover is a lower strike, so losses between the two strikes are not hedged until the 2.25% stop triggers.
- Next-month long options lose value if implied volatility falls, even when NIFTY stays in range.
- Four legs across two expiries mean wide bid-ask spreads; costs added about ₹8,000 to the loss in this test.
- With one trade a month, a single bad month has a large effect on the year.
Who it suits
Experienced option traders comfortable with calendar and diagonal spreads, vega exposure and multi-week holds, who have hedged-selling margin and are prepared for wide bid-ask costs on monthly options.
Questions traders ask
What is a double diagonal spread?
It is a put diagonal and a call diagonal (or calendar) put on together. Near-expiry options are sold and later-expiry options bought, so the trade earns from the faster decay of the near options. Here the put side is a true diagonal and the call side uses the same strike in both months.
Is the double diagonal strategy profitable on NIFTY?
Not in this test. From 1 Oct 2025 to 30 Sep 2026 it lost ₹23,387 before costs and ₹31,459 after ₹20 per order and bid-ask slippage (statutory charges not included), over 13 monthly trades. Past results do not guarantee future ones.
Why is this double diagonal called mildly bullish?
The short put is placed about 1% below the market and the short call about 2% above, so NIFTY has more room to rise than to fall. The lower stop is also tighter (2.25%) than the upper one (3.75%).
Why close the trade the day before expiry?
On the near expiry day the short options can swing sharply and the spread margin benefit lapses. Closing a day earlier avoids expiry-day risk and settlement, at the cost of leaving a little decay on the table.