This trade will only profit or lose if the stock moves below Leg 1 or above Leg 2 rather than between the strikes at expiration. As it gets closer to expiration, it acts more like a synthetic future.
Alias
Long call & put combo, Call & put spread.
Description
Involves buying a call option and a put option on the same underlying asset, with both options having the same expiration date but different strike prices. This strategy allows the trader to profit from either an increase or a decrease in the price of the underlying asset, as the long call option will increase in value if the price of the underlying asset rises, while the long put option will increase in value if the price of the underlying asset falls. The trader’s potential profit is limited to the difference between the strike prices of the two options, minus any premiums paid and commissions or fees associated with the trade.
Breakeven
Sum of the strike price of the put option and the premium paid for the put option, minus the strike price of the call option and the premium received for the call option
Sweetspot
Stock price goes way above Leg 2
Max profit
Unlimited as stock goes way above Leg 2
Max Loss
limited to the premium paid for the put option, minus the premium received for the call option
