Can one of the Big Brain people here help me identify this strategy?

    Buy an at the money put and buy a deep in the money call, both for the same expiration date.

    Name This Strategy
    byu/Sean_VasDeferens inoptions



    Posted by Sean_VasDeferens

    20 Comments

    1. Like a skewed guts straddle I think. The overlapping portion between the strikes is redundant so it’s a complete waste of capital

    2. It’s not a strategy as it doesn’t fit the technicalities of any known option “strategy”. It sounds like you’re long term bullish and short term bearish.

    3. Technically a strangle because you have two options with different strikes that you are long on. However usually a strangle is ATM or OTM contracts.

    4. thatstheharshtruth on

      1. It’s a structure not a strategy. 2. It’s called guts. 3. Reversing the call and puts so no option is ITM is almost always a better trade. 4. Daily reminder that there is no edge in a structure.

    5. VolatilityVandel on

      It’s synthetic options strategy: The combination replicates owning the underlying stock directly. If the stock price increases, the deep in-the-money call option will gain value (as it has a high delta). Meanwhile, the at-the-money put option will lose some value, but because it’s an option to sell at a price close to the current price, the impact is limited. Effectively, the strategy mimics holding a long stock position with some additional leverage due to the options structure.

    6. What are the benefits you see of doing this versus just manipulating the strike or position size of a single option

    7. I dub this “the hedgehog” a high delta call,hedged with an ATM put.with a positive delta around 30.A hog because you can get the same exposure just buying a 30 delta call.

    8. It’s a short guts strangle. Apart from the P&L, it risks early assignment.

      A same series standard strangle ( same strikes and same expiration but both legs OTM) is synthetically equivalent and would be the better way to go

    9. I would have said it’s some type of call ratio spread, but that doesn’t quite define it. As others have suggested a Synthetic Long with Put protection seems to be the best description.

      It depends on how it’s executed, and frankly how long you can hold out before bailing on it.

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