Call diagonal spread

Also called: Diagonal call spread, Poor man's covered call

Buy a later-expiry in-the-money call and sell a near-expiry out-of-the-money call: a cheaper stand-in for a covered call.

Payoff sketch (per unit, index points)

At the near expiry

Today (7 days left)

Net premium

Debit 492 pts

Max profit

+187 pts in this range (₹12,147 per lot)

Max loss

−261 pts in this range (₹16,959 per lot)

Breakeven

24,922

Legs: Buy CE ATM −200 (far expiry) · Sell CE ATM +200. Illustration, not live prices: an index at 25,000, strikes 100 points apart, Black-Scholes premiums at 13% implied volatility, 7 days to the near expiry and 35 to the far one, 6.5% interest, no skew and before charges. Rupees per lot use a NIFTY lot of 65.

How it works

The long far call behaves like the underlying with limited downside; the short near call earns time decay and can be sold again each expiry.

If the price rallies through the short strike, the short call's loss is offset by the long call, but the gain is capped until the short leg expires.

When traders use it

A slow-rise view with repeated premium collection on the near expiry.

Greeks

Delta	Positive.
Gamma	Mixed; negative near the short strike close to its expiry.
Theta	Usually positive.
Vega	Positive (the far leg).

Profit, loss and margin

Max profit	Largest near the short strike at the near expiry; depends on the far call's value then.
Max loss	About the net debit plus charges, on a large fall.
Breakeven	Depends on the far call's value at the near expiry.
Margin	The short call is margined against the long far call; the offset falls away on the near leg's expiry day.

In India

Since February 2025 the calendar-spread margin offset no longer applies on the expiry day of the expiring leg, so a calendar or diagonal can need noticeably more margin on that day.
Since 20 November 2024 each exchange keeps one weekly index expiry: NIFTY on NSE and SENSEX on BSE. Since September 2025 NSE contracts expire on Tuesdays and BSE contracts on Thursdays. BANKNIFTY, FINNIFTY, MIDCPNIFTY and stock options expire monthly (NSE on the last Tuesday). A holiday moves the expiry to the previous trading day.
STT is charged on the premium when an option is sold (0.15% of premium from 1 April 2026 in Arthfy's cost model). A short option left to expire, in or out of the money, is not charged STT again at settlement.

Arthfy numbers

Diagonals span two expiries and are not covered by Arthfy's single-expiry history yet.

Try it in the F&O hub

Opens the tool with this structure on today's NIFTY chain. Reading is free with an Arthfy account; some runs use free attempts.

Open in the builderPayoff, Greeks, scenario grid and charges on today's NIFTY chain

Open the option chainLive premiums, IV and Greeks

Calendars & diagonals

Call calendar spread

Hedges with futures

Covered call (against futures)