Vertical Credit Spread
Structure
Sell 1 OTM (Out of The Money) option, buy 1 further OTM option, same expiration.
Types
Bear Call Spread — for bearish bias
Bull Put Spread — for bullish bias
Example: stock at $98 → Sell 100C, Buy 105C, same expiry.
Used for
Directional plays (bullish or bearish) with short time horizon.
Key traits
Defined risk and reward
Profits from time decay
Best when IV is high
Clean payoff chart (max profit if price stays above/below short strike)
Best when
You expect price to move and stay in your chosen direction.
Note: this is the core structure behind both of my systems:
Calendar Spread
Structure
Sell 1 near-term option, buy 1 longer-term option, same strike.
Types
Calendar Call Spread — for neutral-to-bullish bias
Calendar Put Spread — for neutral-to-bearish bias
Example: stock at $100 → Sell 100C expiring next week, Buy 100C expiring in a month.
Used for
Neutral or range-bound outlook, or when expecting volatility to increase.
Key traits
Gains from IV expansion
Time decay hurts short leg faster
Narrowest profit range (centered on strike)
Usually placed ATM
Best when
You expect the stock to stay near a certain strike — and IV to rise.
Diagonal Spread
Structure
Sell 1 near-term OTM option, buy 1 longer-term further OTM option.
Types
Diagonal Call Spread — for moderately bullish bias
Diagonal Put Spread — for moderately bearish bias
Example: stock at $102 → Sell 105C (near-term), Buy 110C (longer-term)
Used for
Directional setups with time and IV flexibility.
Key traits
Hybrid of vertical and calendar
Complex P/L profile (not symmetric)
Can profit from price move and IV change
Can be adjusted into other structures (e.g. roll the short leg)
Best when
You want directional exposure with time cushion and sensitivity to volatility.
Disclaimer
All content is for informational purposes only and does not constitute financial advice.Any trades or strategies should be tested in a simulated environment before use.Trading involves risk, and all decisions are the sole responsibility of the reader.