Double Diagonal option strategy
Double Diagonal sells near expiry OTM Calls and Puts and buys next expiry options one strike further out on each side. It works like an iron condor that also earns from the faster decay of the near expiry.
Payoff at the near expiry
Nifty, lot size 65 · Nifty future 25,151 · 17 Nov 2026Legs
| Action | Option | Expiry | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|---|
| SELL | OTM Call | 17 Nov | 25,200 | 1 | 65 | ₹89.99 |
| BUY | OTM Call | 23 Nov | 25,250 | 1 | 65 | ₹156.28 |
| SELL | OTM Put | 17 Nov | 25,100 | 1 | 65 | ₹88.99 |
| BUY | OTM Put | 23 Nov | 25,050 | 1 | 65 | ₹154.73 |
How it works
- Sell 1 OTM call at the 25,200 strike for ₹89.99 in the near expiry, collecting the premium.
- Buy 1 OTM call at the 25,250 strike for ₹156.28 in the next expiry, paying the premium.
- Sell 1 OTM put at the 25,100 strike for ₹88.99 in the near expiry, collecting the premium.
- Buy 1 OTM put at the 25,050 strike for ₹154.73 in the next expiry, paying the premium.
- You pay a net ₹8,582 upfront for the position. Your maximum loss is ₹11,832.
Below 24,955 you lose, up to ₹11,832.
Between 24,955 and 25,349 you profit, up to ₹7,382.
Above 25,349 you lose, up to ₹11,832.
Set-up: Sell 1 lot near expiry OTM Call and Buy 1 lot next expiry Call one strike higher; Sell 1 lot near expiry OTM Put and Buy 1 lot next expiry Put one strike lower.
What happens if Nifty moves
Profit or loss at the near expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 23,650 | −6% | −₹11,830 |
| 24,400 | −3% | −₹10,982 |
| 24,900 | −1% | −₹2,178 |
| 25,150 | Unchanged | +₹7,257 |
| 25,400 | +1% | −₹1,990 |
| 25,900 | +3% | −₹10,836 |
| 26,650 | +6% | −₹11,827 |
How the Greeks affect it
When to use
When you expect the underlying to stay in a range till the near expiry and implied volatility is low or expected to rise.
- Wider profit zone than a double calendar.
- Benefits from time decay of the near expiry options.
- The bought options can be rolled into new short options.
Things to watch
- Profit depends on implied volatility and cannot be known exactly upfront.
- Sharp moves either way lead to losses.
- Four legs across two expiries need active management.
Double Diagonal: backtested on NSE data
Real backtests of this structure on NSE data, each with its exact rules, a year of results before and after costs, and where it made and lost money.
- Bullish double diagonal13 trades
Double Diagonal: questions
What is a Double Diagonal strategy?
Double Diagonal sells near expiry OTM Calls and Puts and buys next expiry options one strike further out on each side. It works like an iron condor that also earns from the faster decay of the near expiry.
When should you use a Double Diagonal?
When you expect the underlying to stay in a range till the near expiry and implied volatility is low or expected to rise.
How do you set up a Double Diagonal?
Sell 1 lot near expiry OTM Call and Buy 1 lot next expiry Call one strike higher; Sell 1 lot near expiry OTM Put and Buy 1 lot next expiry Put one strike lower.
What is the maximum profit of a Double Diagonal?
Limited, highest if the underlying is near either sold strike at the near expiry. It depends on the implied volatility left in the next expiry options.
What is the maximum loss of a Double Diagonal?
Limited, if the underlying moves far beyond either bought strike.
What is the breakeven of a Double Diagonal?
With Nifty at 25,151, the example on this page breaks even at 24,955 and 25,349 at expiry.
Watch: Double Diagonal videos
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