UpYield Finance Docs
  • What is UpYield Finance
    • Why UpYield Finance
    • How is Yield Generated
  • FAQ
  • How It Works
    • Connecting your Wallet
    • Choosing a Vault
    • How to Deposit
    • How to Withdraw
  • Products
    • Basic Vaults
      • Covered Calls
      • Protective Puts
      • RWA Yield
      • Market Neutral Liquid Staking
    • Advanced
      • Delta-Hedge Liquidity Provision
      • Covered Call Spread
      • Iron Condor
      • Shark Fin
      • Diagonal Spread
      • Collar
      • Collaterized Debt
      • Uncollaterized Debt
  • The Protocol
    • Vaults Architecture
    • Vault Lifecycle
    • Smart Contract Architecture
    • Smart Contract Addresses
    • Strike Price Selection for Options
    • Options Settlement
    • Cross-Chain Execution
    • Protocol Fees
  • UpYield Finance DAO
    • Governance
    • DAO Treasury
    • Tokenomics
  • Security and Risk
    • Risks
    • Audits
    • Best Practices
Powered by GitBook
On this page
  1. Products
  2. Advanced

Diagonal Spread

Also called Bull (Bear) Leveraged Covered Call (Put)

  • Long in-the-money (ITM) far-expiry call, strike price A

  • Short out-of-the-money (OTM) short-term call, strike price B

  • Generally, the underlying price will be closer to strike B than strike A

The long in the money call gives the right to buy at strike A. Selling the call at strike B obligates to sell at that strike price if assigned. The Bear version uses ITM far puts and OTM near puts.

This strategy acts like a covered call by using the far expiry call as a surrogate for owning the underlying. The premium received for selling the call represents a higher percentage of the initial investment than if buying the underlying outright. The potential return is leveraged and the downside exposure is reduced.

PreviousShark FinNextCollar

Last updated 1 year ago