Investment Type: Credit
Strike Prices: OTM for sold leg, ITM for bought leg
Expiration Month: current month for sold leg, later month for bought leg
Composition: Buy Call + Sell Call

Diagonal Call is a Calendar Call with different strike prices. We buy longer term deep-ITM Call Options and sell OTM Call every month. This strategy eliminates the problem associated with Calendar Call, but of course it’s more expensive than Calendar Call and cheaper than Covered Call.

This strategy is most suitable for traders who feel bullish about a particular stock for long term. They can buy longer term near the money Call and sell (far) OTM Call every month for extra income/profit. This will lower the breakeven point and can pay for the cost of the Buy Call.

In the case that the sold leg becomes ITM, the profit in the bought leg will be more than enough to cover the loss in the sold leg. This is the advantage of diagonal call over calendar call.