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Synthetic Call Vs Long Combo Options Trading Strategy Comparison

Compare Synthetic Call and Long Combo options trading strategies. Find similarities and differences between Synthetic Call and Long Combo strategies. Find the best options trading strategy for your trading needs.

Synthetic Call Vs Long Combo

  Synthetic Call Long Combo
Synthetic Call Logo Long Combo Logo
About Strategy A Synthetic Call strategy is used by traders who are currently holding the underlying asset and are Bullish on it for the long term. But he is also worried about the downside risks in near future. This strategy offers unlimited reward potential with limited risk. The strategy is used by buying PUT OPTION of the underlying you are holding for long. If the price of the underlying rises then you make profits on holdings. If it falls then your loss will be limited to the premium paid for PUT OPTION. A long Combo strategy is a Bullish Trading Strategy employed when a trader is expecting the price of a stock, he is holding to move up. It involves selling an OTM Put and buying an OTM Call. The strategy requires less capital as the cost of Call Option is covered by premium received from Put Option. Say SBI shares are currently trading at Rs 500. You are bullish on it but doesn't want to invest or have capital to do it. You can use Long Combo strategy here by selling a Put option of SBI at strike price of Rs 400 and buying a Call Option at a strike price of Rs 600. You will earn premium on sell Put Option and pay premium on buying Call Option. you are investing less but will benefit if SBI shares rises as per your expectations.
Market View Bullish Bullish
Strategy Level Beginners Advance
Options Type Call + Underlying Call + Put
Number of Positions 2 2
Risk Profile Limited Unlimited
Reward Profile Unlimited Unlimited
Breakeven Point Underlying Price + Put Premium Call Strike + Net Premium

When and how to use Synthetic Call and Long Combo?

  Synthetic Call Long Combo
When to use?

A Synthetic Call option strategy is when a trader is Bullish on long term holdings but is also concerned with the associated downside risk.

Long Combo strategy should be deployed when you're Bullish on an underlying but don't have the required capital or the risk appetite to invest directly into it.

Market View Bullish
Bullish

When you are expecting the price of the underlying to move up in near future.

Action
  • Buy Underlying
  • Buy Put Option

The strategy is used by buying PUT OPTION of the underlying you're holding for long. If the price of the underlying rises then you make profits on holdings. If it falls then your loss will be limited to the premium paid for PUT OPTION.

  • Sell OTM Put Option
  • Buy OTM Call Option

Breakeven Point Underlying Price + Put Premium
Call Strike + Net Premium

Compare Risks and Rewards (Synthetic Call Vs Long Combo)

  Synthetic Call Long Combo
Risks Limited

Maximum loss happens when price of the underlying moves above strike price of Put.

Max Loss = Premium Paid

Unlimited

Long Combo is a high risk strategy. You will start losing money when the price of the underlying moves below the lower strike price. Your losses can be unlimited depending on how low the price of underlying falls.

Rewards Unlimited

Maximum profit is realized when price of underlying moves above purchase price of underlying plus premium paid for Put Option.

Profit = (Current Price of Underlying - Purchase Price of Underlying) - Premium Paid

Unlimited

Long Combo is a high return strategy. You will earn profits if the underlying moves above the higher price of the underlying. Your profit will depend on how high the price of the underlying moves.

Maximum Profit Scenario

Underlying goes up

Underlying goes up and Call option exercised

Maximum Loss Scenario

Underlying goes down and option exercised

Underlying goes down and Put option exercised

Pros & Cons or Synthetic Call and Long Combo

  Synthetic Call Long Combo
Advantages

Provides protection to your long term holdings.

Brings down the cost of investing in a Bullish stocks. And delivers high returns if prices move up.

Disadvantage

You can incur losses if underlying goes down and the option is exercised.

Losses can be high if prices don't move as expected.

Simillar Strategies Married Put







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