Synthetic Call Vs Long Combo Options Trading Strategy Comparison

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.

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

• 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

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

Max Loss = Premium Paid

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.

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

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.

Underlying goes up

Underlying goes up and Call option exercised

Underlying goes down and option exercised

Underlying goes down and Put option exercised

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.

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

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