Back
BlogsShort combination/ Risk Reversal/ Combo (same strike)

Long combination/ Risk Reversal/ Combo (same strike)Vomma

Tyler Krett

Wednesday 14 December 2022

Share on:

Vomma facebookVomma twitterVomma linkedin

Post views: 19261

Short combination/ Risk Reversal/ Combo (same strike)

Categories

Option Strategies

Buying the put gives you the right to sell the stock at strike price A. Selling the call obligates you to sell the stock at strike price A if the option is assigned.

This strategy is often referred to as “synthetic short stock” because the risk / reward profile is nearly identical to short stock.

If you remain in this position until expiration, you are probably going to wind up selling the stock one way or the other. If the stock price is above strike A, the call will be assigned, resulting in a short sale of the stock. If the stock is below strike A, it would make sense to exercise your put and sell the stock. However, most investors who run this strategy don’t plan to stay in their position until expiration.

At initiation of the strategy, you will most likely receive a net credit, but you will have some additional margin requirements in your account because of the short call. However, those costs will be fairly small relative to the margin requirement for short stock. That’s the reason some investors run this strategy: to avoid having too much cash tied up in margin created by a short stock position.

No attachments

Long combination/ Risk Reversal/ Combo (same strike)Vomma

Related reads

Option Strategies
Long combination/ Risk Reversal/ Combo (same strike)-image

Tyler Krett

Wednesday 14 December 2022

Long combination/ Risk Reversal/ Combo (same strike)

Buying the call gives you the right to buy the stock at strike price A. Selling the put obligates you to buy the stock at strike price A if
Long combination/ Risk Reversal/ Combo (same strike)

0


Comments (0)

Option Strategies
Short Straddle-image

Tyler Krett

Wednesday 14 December 2022

Short Straddle

A short straddle gives you the obligation to sell the stock at strike price A and the obligation to buy the stock at strike price A if the o
Short Straddle

0


Comments (0)

Get started with Leviathan FM today

7 day free trialContact us
See our pricing

© 2015 - 2024 Leviathan Financial Management LLC. All Rights Reserved.

Legal Disclaimer: The information provided in the Leviathan website is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial advisor professional to determine what may be best for your individual needs. Leviathan Financial Management does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, Leviathan Financial Management disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. Content contained on or made available through the website is not intended to and does not constitute legal advice or investment advice. Your use of the information on the website or materials linked from the Web is at your own risk.

Structured by Krett