Long Synthetic Put Options Straddle – A Delta Neutral Strategy Overview

• Strategy: Buy ATM call options contract + Short Stock (ratio of 2 to 100)

• Number of legs: 2

• Market Prognosis = Either Bullish and Bearish (Non-Directional)

• Implied Volatility = In the low 20% of the last one year.  This requires specialist software such as Optionetics Platinum.

• Expiration Month = 60 days or more to expire

• Cost = Risk Max Loss = Limited to premium paid for Synthetic Calls Straddle = Premium paid for call options contracts

• Max Profit = Unlimited

• Upside Breakeven Point = Call strike price + premium paid for call contracts

• Downside Breakeven Point = Call strike price – premium paid for call contracts

• Margin = None

• Advantage over Straight Call or Put = Make money regardless stock is up or down

• Advantage over Put or Call Spread = reason above + unlimited profit in either direction.

• Disadvantage over Straight Call or Put and Put or Call Spread = Significant higher cost + exposure to an IV crash

• Advantage over Straddle/Strangle = None

• Disadvantage over Straddle = Potentially higher cost

Tags: Long, Put Options, Straddle, Strategy Overview, Synthetic

Category: Straddle & Strangle