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Long Call Synthetic Straddle
The long call synthetic straddle recreates the long straddle strategy by shorting the underlying stock and buying enough atthemoney calls to cover twice the number of shares shorted. That is, for every 100 shares shorted, 2 calls must be bought.
Long Call Synthetic Straddle Construction 
Buy 2 ATM Calls Short 100 Shares 
Long call synthetic straddles are unlimited profit, limited risk options trading strategies that are used when the options trader feels that the underlying asset price will experience significant volatility in the near term.
Unlimited Profit Potential
Large gains are made with the long call synthetic straddle when the underlying asset price makes a sizable move either upwards or downwards at expiration.
The formula for calculating profit is given below:
 Maximum Profit = Unlimited
 Profit Achieved When Price of Underlying > Strike Price of Long Call + Net Premium Paid OR Price of Underlying
Limited Risk
Maximum loss for the long call syntethic straddle occurs when the underlying asset price on expiration date is trading at the strike price of the call options purchased. At this price, both options expire worthless, while the short stock position achieved breakeven. Hence, a maximum loss equals to the net premium paid is incurred by the options trader.
The formula for calculating maximum loss is given below:
 Max Loss = Net Premium Paid + Commissions Paid
 Max Loss Occurs When Price of Underlying = Strike Price of Long Call
Breakeven Point(s)
There are 2 breakeven points for the long call synthetic straddle position. The breakeven points can be calculated using the following formulae.
 Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid
 Lower Breakeven Point = Sale Price of Underlying – Net Premium Paid
Example
Suppose XYZ stock is trading at $40 in June. An options trader enters a long call synthetic straddle by buying two JUL 40 calls for $200 each and shorting 100 shares for $4000. The net premium paid for the calls is $400.
If XYZ stock is trading at $50 on expiration in July, the two JUL 40 calls expire inthemoney and has an intrinsic value of $1000 each. Selling the call options will net the trader $2000. However, the short stock position suffers a loss of $1000. Subtracting the initial debit of $400, the long call synthetic straddle trader’s profit comes to $600.
On expiration in July, if XYZ stock is still trading at $40, both the JUL 40 calls expire worthless while the short stock position broke even. Hence, the long call synthetic straddle trader suffers a maximum loss which is equal to the initial net premium paid of $400 taken to enter the trade.

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Long Put Synthetic Straddle
The synthetic straddle can also be implemented using long puts instead of long calls and that strategy is known as the long put synthetic straddle.
Note: While we have covered the use of this strategy with reference to stock options, the long call synthetic straddle is equally applicable using ETF options, index options as well as options on futures.
Commissions
For ease of understanding, the calculations depicted in the above examples did not take into account commission charges as they are relatively small amounts (typically around $10 to $20) and varies across option brokerages.
However, for active traders, commissions can eat up a sizable portion of their profits in the long run. If you trade options actively, it is wise to look for a low commissions broker. Traders who trade large number of contracts in each trade should check out OptionsHouse.com as they offer a low fee of only $0.15 per contract (+$4.95 per trade).
Similar Strategies
The following strategies are similar to the long call synthetic straddle in that they are also high volatility strategies that have unlimited profit potential and limited risk.
Long Put Synthetic Straddle
The long put synthetic straddle recreates the long straddle strategy by buying the underlying stock and buying enough atthemoney puts to cover twice the number of shares purchased. That is, for every 100 shares bought, 2 put contracts must be bought.
Long Put Synthetic Straddle Construction 
Buy 2 ATM Puts Long 100 Shares 
Long put synthetic straddles are unlimited profit, limited risk options trading strategies that are used when the options trader feels that the underlying asset price will experience significant volatility in the near future.
Unlimited Profit Potential
Large gains are made with the long put syntethic straddle when the underlying asset price makes a sizable move either upwards or downwards at expiration.
The formula for calculating profit is given below:
 Maximum Profit = Unlimited
 Profit Achieved When Price of Underlying > Purchase Price of Underlying + Net Premium Paid OR Price of Underlying
Limited Risk
Maximum loss for the long put synthetic straddle occurs when the underlying asset price on expiration date is trading at the strike price of the put options purchased. At this price, both options expire worthless, while the long stock position achieved breakeven. Hence, a maximum loss equals to the net premium paid is incurred by the options trader.
The formula for calculating maximum loss is given below:
 Max Loss = Net Premium Paid + Commissions Paid
 Max Loss Occurs When Price of Underlying = Strike Price of Long Put
Breakeven Point(s)
There are 2 breakeven points for the long put synthetic straddle position. The breakeven points can be calculated using the following formulae.
 Upper Breakeven Point = Purchase Price of Underlying + Net Premium Paid
 Lower Breakeven Point = Strike Price of Long Put – Net Premium Paid
Example
Suppose XYZ stock is trading at $40 in June. An options trader executes a long put synthetic straddle by buying two JUL 40 puts for $200 each and buying 100 shares of XYZ stock for $4000. The net premium paid for the puts is $400.
If XYZ stock plunges to $30 on expiration in July, the two JUL 40 puts expire inthemoney and has an intrinsic value of $1000 each. Selling the put options will net the trader $2000. However, the long stock position suffers a loss of $1000. Subtracting the initial premium paid of $400, the long put synthetic straddle’s profit comes to $600.
On expiration in July, if XYZ stock is still trading at $40, both the JUL 40 put options expire worthless while the long stock position broke even. Hence, the long put synthetic straddle suffers a maximum loss which is equal to the initial net premium paid of $400 taken to enter the trade.
Long Call Synthetic Straddle
The synthetic straddle can also be implemented using calls instead of puts and that strategy is known as the long call synthetic straddle.
Note: While we have covered the use of this strategy with reference to stock options, the long put synthetic straddle is equally applicable using ETF options, index options as well as options on futures.
Commissions
For ease of understanding, the calculations depicted in the above examples did not take into account commission charges as they are relatively small amounts (typically around $10 to $20) and varies across option brokerages.
However, for active traders, commissions can eat up a sizable portion of their profits in the long run. If you trade options actively, it is wise to look for a low commissions broker. Traders who trade large number of contracts in each trade should check out OptionsHouse.com as they offer a low fee of only $0.15 per contract (+$4.95 per trade).
Similar Strategies
The following strategies are similar to the long put synthetic straddle in that they are also high volatility strategies that have unlimited profit potential and limited risk.
Synthetic Long Call
A synthetic long call is created when long stock position is combined with a long put of the same series. It is so named because the established position has the same profit potential as a long call.
Married put and protective put strategies are examples of synthetic long calls.
Synthetic Long Call Construction 
Long 100 Shares Buy 1 ATM Put 
Unlimited Profit Potential
The formula for calculating profit is given below:
 Maximum Profit = Unlimited
 Profit Achieved When Price of Underlying > Purchase Price of Underlying + Premium Paid
 Profit = Price of Underlying – Purchase Price of Underlying – Premium Paid
Limited Risk
The formula for calculating maximum loss is given below:
 Max Loss = Premium Paid + Commissions Paid
 Max Loss Occurs When Price of Underlying
Breakeven Point(s)
The underlier price at which breakeven is achieved for the synthetic long call position can be calculated using the following formula.
 Breakeven Point = Purchase Price of Underlying + Premium Paid
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