Synthetic ShortStraddle for CashAccount

Discussion in 'Options' started by earth_imperator, Apr 23, 2023.

  1. Can someone test/analyse/comment this multi-leg construct for a CashAccount,
    using the same one underlying ticker in all legs:
    1 CoveredCall + 1 CashSecuredPut + 2 LongPuts
    for example using ATM and DTE=60 or so. The 2 LongPuts can also have longer DTEs.
    Isn't the PnL diagram for the whole construct looking much like that of a ShortStraddle,
    at least for the initial timespan of up to the shortest DTE?
    Of course by varying the strikes it should be possible to get an outcome that resembles a ShortStrangle.
     
    Last edited: Apr 23, 2023
  2. A better and simpler construct seems to be the following one, ie. a Collar:
    1 CoveredCall + 1 LongPut
     
  3. This is a calendar if strikes are the same.
     
  4. This a bull vertical totally different profile to other setup you posted.
     
  5. @getthatintoya, thx for your analysis. I'm after a construct that gives roughly a similar result like a ShortStraddle (ie. like a roof), but which can be used in a CashAccount.
     
  6. I guess by cash account you mean no naked options if so the following will get you very close to what you want.
    Buy 100 XYZ shares at 100 sell 2 105 calls buy 1 120 call. Syn short straddle with a call kicker wing.
     
    earth_imperator likes this.
  7. @getthatintoya, in a CashAcct only the following constructs are possible: LongStock, LongCall, LongPut, CoveredCall (ie. LongStock + ShortCall), and CashCoveredPut (ie. ShortPut plus Cash for Strike - Premium).

    This means, selling 2 calls requires to have 200 shares of the underlying stock...
     
  8. So you can't trade verticals or calenders... forget about options then if that's all you can do from what you said above.
     
  9. Hmm. I don't understand as I surely can create verticals, calendars, as well diagonals, at least using Put (then of course meaning CashSecuredPut).
     
  10. Well my above example breaks down to a covered call + a bear call vertical.
     
    #10     Apr 23, 2023