Long Call Synthetic Straddle Option Strategy

Long call synthetic straddle is a synthetic option strategy with two legs. It replicates long straddle with a combination of short underlying position and call options. Like long straddle, it is long volatility and has limited loss and unlimited potential profit.

long call synthetic straddle option strategy


Classic long straddle option strategy includes long call option and long put option, both with the same strike and expiration.

In synthetic straddle, either the call or the put is replaced with its synthetic equivalent.

There are therefore two variants of the synthetic long straddle strategy (the other is long put synthetic straddle).

Long call synthetic straddle replaces the long put option from classic straddle with synthetic put, which consists of short underlying position and a long call option.

Long straddle = long call + long put

Synthetic put = short underlying + long call

Long call synthetic straddle = short underlying + 2x long call

The long call position size doubles (one part is the long call from classic long straddle, the other is from the synthetic put).

Long call synthetic straddle is created with the following transactions:

  • Buy 2 call option contracts.
  • Sell short 100 shares of the underlying stock.

This assumes one option contract represents 100 shares of the underlying stock, as for US traded stock options.

The short underlying position (number of shares sold short, in our example 100) must always correspond to half the shares represented by the long call options (in our example 200 shares, from two contracts).

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