A diagonal put spread that involves the selling of a given amount (one or more) of near-month out-of-the-money put options and the purchase of an equal amount of far-month at-the-money put options, on the same underlying. The ratio of short contracts to long contracts must be 1 to 1. The initial cost to establish this strategy, which is also the maximum loss, is equal to the premium(s) paid for the long contracts. The maximum gain varies with changes in the intrinsic value of the underlying.

This two-leg strategy is usually pursued on the expectation that the underlying would move sideways up to a certain level after which the view turns bullish (down-market).

The long diagonal put spread is also known as a diagonal put bear spread.