Synthetic Short Straddle With Calls
Options are an important derivative class which allow traders to take positions and generate profits with limited amount of risks. Traders going long on options have to pay a premium whereas those going short/ writing the option charge premium. Apart from this there are multiple option trading strategies which enable traders to further reduce their downside risk and increase the chances of profit making based on different scenarios.
A synthetic short straddle with calls is an options strategy comprised of being long on stock and simultaneously selling 2 lots of ATM call option. It is used when the trader believes the underlying asset will not move significantly over the lives of the options contracts. The maximum loss is unlimited. The maximum profit is limited if the stock remains in a range.
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