Hi Folks, Diagonal spreads have long been known as an excellent risk/reward means of net selling options time value (TV). For those unfamiliar with this technique it consists of buying an option in an out month and selling the same type of option, but at a different strike in the front month. It can be done in either puts or calls, depending on your market expectations. The preference is to use puts in ascending and calls in descending markets to reduce exit commissions on successful closeouts. The GLD options are an attractive vehicle for this strategy, due to a large and active market, volatility, underlying directional trend and high TV in front month contracts. At last Friday's expiry (GLD at 134.20), I entered a bullish diagonal spread, buying the Feb 134 and selling the Jan 135 puts for a debit of 0.80 (margin required 1.80). The range of prices at the Jan expiry at which profit will be gained is quite large. Should the market remain at 134.20 (unlikely), the 135 puts would be worth 0.80 and the Feb 135 about 2.40, a profit of 1.60 or 100% before commissions. At 135, the Jan puts would be worthless and the Febs about 1.90. Should GLD rise beyond 135, there would be a net profit at any finish all the way up to about 139, or 4% above the price of GLD at inception. On the downside, a finish at 133 would make the spread marginally profitable and losses would be generated at a diminishing rate starting at 132 with a loss of 0.25. The great feature of this technique is that the long side can be rolled up and/or down to protect profit potential when break even levels are approached. For those interested in how this strategy will be managed, you can follow the progress on my blog at: blog.wastingassets.net. Good luck and good trading.