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


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

1 Comments

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