Long Put Synthetic Strangle Option Strategy

Long put synthetic strangle is a synthetic option strategy with three legs. It replicates long strangle using a long underlying position and two put options with different strikes. Like long strangle, it is long volatility and has limited loss and unlimited potential profit.

long put synthetic strangle option strategy


Let's say a stock is currently trading at $81.25. We can set up a long put synthetic strangle with the following transactions:

  • Buy 100 shares of the stock for $81.25 per share.
  • Buy the 80-strike put option for $3.72.
  • Buy the 85-strike put with same expiration for $6.57.

The resulting position has exposures similar to a 80-85 classic long strangle: long 80-strike put and 85-strike call. The 80-strike put is the same, while the 85-strike call has been replaced with synthetic long call (long underlying and long 85-strike put).

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