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Synthetic long straddle

• Is constructed by the purchase of a futures contract or underlying instrument coupled with the purchase of two at-the-money puts. Since the purchase of the underlying with the purchase of one at-the-money put is a synthetic long call, then the purchase of the second put completes this synthetic option strategy. This synthetic long straddle position can also be constructed by the short sale of the futures or underlying coupled with the purchase of two at-the-money calls. Here, the short sale of the underlying and the purchase of the put create a synthetic long put position. The purchase of the second call completes this synthetic option strategy. Note that in both cases, the buyer is paying a premium or purchasing time value which makes the position synthetically long.

 
 Embedded terms in definition
 Call
Contract
Futures contract
Futures
Long straddle
Long
Note
Option
Position
Premium
Purchase
Put
Sale
Short sale
Short
Straddle
Synthetic long call
Synthetic long put
Time value
Time
Underlying
 
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