Advertising

Synthetic short straddle

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

 
 

Follow this link for all the terms related to short.

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

<< Synthetic short put Synthetics >>

What to Know Before Declaring Your Financial Independence: Twenty-somethings may not realize it, but every time they enter a new phase of their life as young adults - perhaps starting college, a career or a family - they're also venturing into a new world of money management. Here are ways to be prepared. More...

To handle yourself, use your head; to handle others, use your heart. Donald Laird

Advertising



Copyright 2009-2018 GVC. All rights reserved.