A diagonal is the sum of a calendar and vertical. It has the risks inherent in each of those positions. Any time spread has deferred month vol risk. It's not necessarily a risk to avoid, but it is one more feature you have to consider.
This is one of the most important things about calendars. I hear so often that when vol is low you buy calendars but the truth is you need to know the skew between months. Vol could be sky high and the calendar could still be a good bet. Just make sure you know the underlying reason if skew/vol is extreme.
I seems Maverick implies that time-skew is the only reason why calendars seem attractive. I'm still not convinced, maybe because I'm missing a point here. As I said, I never used long calendars to buy low volatility but I used short ones to sell high vol. Since that works I don't see why the opposite wouldn't. I'm using using index (future) options on DAX, IV's for both legs seem to be in sync, or close.
Regardless of volatility being high or low, it is volatility's trend affecting calendars. Uptrending volatility benefits the calendar extending its breakeven points and downtrending volatility reduces the profitable zone. Don't be fooled by low volatility being optimal to open a calendar position, if the volatility keeps going lower it will negatively affect the calendar. Same for high vol, if it keeps going higher, it will help the calendars chances for profit.
I trade SPX weekly calendars every week quite successfully. It is key to adjust them early when price approaches breakevens, either with a long option to reduce Deltas to zero or turning it into a double calendar. Don't try to ride them all the way to expiration, get a 10% profit and exit.
Are you trading the calendar to express a directional bias for the week? i.e. you see SPX going to 2100, buy the 2100 calendar.
I trade ATM calendars to benefit from Theta (time decay). Since I don't know how to predict predict market direction, I start Delta neutral. A bias calendar can produce good profits fast, but you must act quickly if it goes against you, usually by adjusting since it is costly to close a calendar in a rapidly adverse market.
For a directional trade you may be better off using an OTM butterfly which requires less capital (risk) for the same profit potencial
Can you explain how you keep the calendar delta neutral? Do you mean start with same delta for both the short and long (i.e., if near leg has a different delta than far, adjust the contracts amount to keep it delta neutral) or essentially diagonalize the calendar to keep delta neutral? I am curious because I do trade calendars but usually without regard to delta, mostly just do a directional and range bet and also try to take advantage of the theta for the short leg.. Appreciate your input.