Easy Money Scanner

Calendar & diagonal spreads

How do I construct a Synthetic Straddle using a combination of long equity shares and long puts?

By Easy Money Scanner · Educational reference · Not investment advice

The short answer

A Synthetic Straddle can be approximated by combining long stock with long puts (for a synthetic long call exposure) sized to mimic a straddle's upside and downside profit profile.

How it works

This structure uses stock ownership plus protective/directional puts to replicate payoff characteristics similar to options-based combinations, though cost basis and capital requirements differ substantially from pure options straddles.

An example

Owning 100 shares at $100 and buying 2 puts at the 100 strike can approximate a straddle-like payoff, gaining on both large rallies and declines.

Risk & limitations

Capital requirements for holding stock are far higher than an options-only straddle, and the payoff is only an approximation, not an exact replication of a true long straddle.

Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.

Sources & further reading