ApexVol

Vertical vs Diagonal Spreads

Understand the structural differences between vertical and diagonal spreads to choose the right tool for your market outlook.

Spread Strategies
Defined Risk
Multi-Leg
Last Updated:
13 min read
Reviewed by: ApexVol Trading Team
Fact-checked & Up-to-date

What is This comparison?

This comparison Vertical spreads use the same expiration with different strikes, while diagonal spreads use different expirations and usually different strikes.

This fundamental difference creates distinct theta and vega profiles, making each spread type suited for different market conditions.

Quick Comparison

Feature Vertical Spread Diagonal Spread
Max Profit Premium received (credit) or width - debit (debit) Variable (depends on IV)
Max Loss Width - premium (credit) or debit paid (debit) Net debit paid
Break Even Short strike +/- net premium Complex (depends on IV at expiration)
Best For Directional views, income IV plays, time decay capture
Win Rate 55-75% depending on setup 50-65%
Complexity Beginner-Intermediate Intermediate-Advanced
Capital Required $500-2,000 $500-3,000

Feature-by-Feature Comparison

Complexity
Simpler ✓ vs More complex
Theta Profile
Linear decay vs Complex (can reverse)
Vega Exposure
Lower vs Higher
Capital Efficiency
Better defined ✓ vs Variable
Adjustment Flexibility
Limited vs More options ✓

When to Use Vertical Spread

Use vertical spreads when you have a directional view and want defined risk/reward with simple management. Best for income trading and directional plays.

Learn Vertical Spread

When to Use Diagonal Spread

Use diagonal spreads when you want to exploit term structure, create Poor Man's Covered Calls, or have a longer-term view with short-term income.

Learn Diagonal Spread

Vertical Spread Examples

  • Bull Put Spread: Sell higher put, buy lower put
  • Bear Call Spread: Sell lower call, buy higher call
  • Bull Call Spread: Buy lower call, sell higher call
  • Bear Put Spread: Buy higher put, sell lower put

Diagonal Spread Examples

  • PMCC: Buy far-dated ITM call, sell near-dated OTM call
  • Calendar: Same strike, different expirations
  • Double Diagonal: Diagonals on both sides

Frequently Asked Questions

What is the difference between vertical and diagonal spreads?

Vertical spreads have the same expiration date with different strikes. Diagonal spreads have different expiration dates and usually different strikes. This creates different theta and vega profiles - verticals are directional plays, diagonals are time/volatility plays.

Are diagonal spreads better than vertical spreads?

Neither is inherently better. Vertical spreads are simpler with defined risk/reward, best for directional trades. Diagonal spreads offer more flexibility and can exploit term structure, but are more complex to manage. Choose based on your thesis and complexity tolerance.

Ready to test these strategies?

Try both Vertical Spread and Diagonal Spread in our free strategy simulator with real market data.