15 lines
1.0 KiB
Plaintext
15 lines
1.0 KiB
Plaintext
Combined, the long call and the synthetic long put (long call plus short
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stock) creates a synthetic straddle. A long synthetic straddle could have
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similarly been constructed with a long put and a long synthetic call (long
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put plus long stock). Furthermore, a short synthetic straddle could be
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created by selling an option with its synthetic pair.
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Notice the similarities between the greeks of the two positions. The
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synthetic straddle functions about the same as a conventional straddle.
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Because the delta and gamma are nearly the same, the up-and-down risk is
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nearly the same. Time and volatility likewise affect the two trades about the
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same. The only real difference is that the synthetic straddle might require a
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bit more cash up front, because it requires buying or shorting the stock. In
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practice, straddles will typically be traded in accounts with retail portfolio
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margining or professional margin requirements (which can be similar to
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retail portfolio margining). So the cost of the long stock or margin for short
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stock is comparatively small. |