Series 7 practice questionhardOptions — Diagonal Spread
A diagonal spread combines elements of which two types of spreads?
- AStraddle and strangle
- BVertical spread and calendar spread✓ Correct answer
- CBull spread and bear spread
- DCredit spread and debit spread
Explanation
Why B — Vertical spread and calendar spread
A diagonal spread uses options with both different strike prices (like a vertical spread) and different expiration dates (like a calendar spread). For example, buying a longer-dated call at one strike and writing a shorter-dated call at a different strike. It combines price and time elements in one strategy.
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