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Synthetic

Long Combo

A long OTM call plus a short OTM put at different strikes — a synthetic long with a bullish lean and a possible net credit.

Max GainUnlimited (upward move)
Max LossCapped — Put strike − Net credit (with the underlying at zero)
Break-evenCall strike + Net debit if opened for a debit; Put strike − Net credit if opened for a credit
TypeSmall credit or debit
Ideal IV environmentIndifferent — the position is practically vega neutral

Profit / Loss Diagram

Long Combo at expiration

Short Put Long Call Ganancia ilim. Pérdida creciente

What is this strategy?

The Long Combo is functionally equivalent to a bullish Risk Reversal but with the emphasis on creating a cheap or free synthetic long stock position. Construction: sell 1 OTM put (collecting a credit) and buy 1 OTM call (paying a debit). If the put’s credit offsets the call’s cost, the position is free or nearly so.

The payoff closely resembles owning the shares: linear gains on the upside as the call covers all of it, a neutral zone between the strikes, and growing losses on the downside as the short put obliges you to buy. It is a way to create long exposure with very little capital committed.

It suits bullish traders with limited capital, or those wanting to replicate long stock without the full outlay. The risk: the downside loss can be very large, because the put is sold naked, so it demands margin and discipline.

Construction

ActionInstrumentStrikeExpirationExample
SELL1 PutOTM (lower)30-90 DTE-1 SPY May 440 Put
BUY1 CallOTM (higher)Same expiry+1 SPY May 460 Call

Example

SPY at $450, moderately bullish outlook.

  • Put Sold (440) +$300 premium received
  • Call Purchased (460) −$250 premium paid
  • Net Credit +$50
  • Zone Between Strikes Between $440 and $460 you keep exactly the $50 credit
  • Breakeven $439.50 (440 strike − 0.50 credit per share)
  • Profit if SPY = $500 +$4,050 ($4,000 from the call + $50 credit)
  • Loss if SPY = $400 −$3,950 ($4,000 on the sold put − $50 credit)
  • Maximum Loss $43,950 (440 × 100 − $50), if SPY falls to zero

The Greeks

δDelta — Bullish

Net delta near +1, similar to long stock.

θTheta — Neutral

The long call and short put roughly cancel.

νVega — Neutral

Net vega close to zero.

γGamma — Long at the Strikes

Long gamma from the call on the upside, short gamma from the sold put on the downside.

Position Management

  1. 01
    Stop Loss on the Short Put If the underlying drops to the short strike, consider closing or rolling the position to avoid assignment.
  2. 02
    Take Profits on the Call If the call appreciates significantly, you can close it to bank gains and keep only the short put.

Frequently Asked Questions

When should this structure be opened?
When you want bullish exposure with little or no outlay: you sell an out-of-the-money put and buy an out-of-the-money call, so the credit from the first finances the second.
What is its main risk?
The uncovered short put. If the underlying collapses the loss is large — down to the put strike less the credit — though not unlimited, because price cannot go below zero.
How is it managed before expiration?
By closing or rolling the put if price approaches its strike, exactly as with any short put position.
Which strategy is it most often confused with?
The risk reversal, which is essentially the same idea. The difference is emphasis: the combo aims to replicate stock at the lowest possible cost.
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Términos Relacionados

Risk ReversalThe same structure with a different emphasis.Synthetic Long StockShort Combo