Synthetic Long Straddle w/ Puts

Involves buying a put option and a call option with the same strike price and expiration date, and selling the underlying asset. This strategy is similar to a traditional long straddle, but it uses put options instead of call options to create the synthetic position.

Description

The goal of this strategy is to profit from significant price movements in either direction. If the underlying asset’s price increases significantly, the call option will expire in the money and offset the loss from the put option expiring out of the money. If the underlying asset’s price decreases significantly, the put option will expire in the money and offset the loss from the call option expiring out of the money.

Breakeven

Strike price of the options plus the premium paid for the synthetic position, which is the total cost of the call and put options.

Sweetspot

Stock price either goes way up or way down

Max profit

unlimited, as the underlying asset’s price can continue to rise or fall beyond the breakeven point.

Max loss

is the total premium paid for the position, which is the cost of the call and put options.