This strategy is the mirror image of the ITM Call Diagonal Spread.  The position consists of two legs 1) a long ITM Put placed 6-8 months out (even LEAPS can be considered) and 2) sell an ATM or slightly OTM front month Put.  The strategy can produce monthly income from the sale of the front month option.  This is best used in a steadily and slightly bearish market.  If the front month Puts are sold strategically, one can proceed to reduce the cost basis of the back month ITM Put and play the longer term appreciation of the long Put.

Review the risk graph and you should gain understanding of the risk and reward of the strategy.  Best, Robin

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