bearishPays debit

Put Diagonal

A put diagonal buys a longer-dated put at a higher strike and sells a nearer-dated put at a lower strike. It behaves like a bearish debit spread with time decay working for you — and it can replace a put credit spread with a higher probability of profit.

When it makes sense

You're bearish over the next few weeks but want theta on your side
Front-month IV is rich relative to the back month
You want a position that can be re-loaded by rolling the short put

How it works

Buy a back-month put (often 0.55–0.8 delta), sell a front-month put at a lower strike, for a net debit. Value at the front expiry peaks with the stock at the short strike — falling, but not collapsing through it.

Risk & reward

Maximum loss: the net debit. A sharp rally hurts (both puts fade), while a crash through the short strike compresses the spread toward its width. Best managed at the front expiration rather than held passively.

Worked example

Stock at $90. Buy the 60-day $92 put for $6.20, sell the 21-day $84 put for $1.50 — a $470 debit. Stock at $84 at the front expiry: the long put is worth ~$9 — roughly a $430 profit.

Scan the market for put diagonals

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