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Short Synthetic Straddle


A synthetic straddle that is constructed with two short calls (ATM calls) and 100 long stocks or with two short puts (ATM puts) and 100 short stocks. This strategy limits profit to the credit (premiums) received on the short puts, while it results in an unlimited risk in either direction (upward and downward). If the stock moves substantially in either direction, a huge loss can be incurred.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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