---
description: "A volatility strategy shorting stock and buying two ATM calls at strike K, replicating a long straddle by replacing the long put with a synthetic put."
tags: [options, volatility, neutral, synthetic, straddle]
---

# Long Call Synthetic Straddle

**Section**: 2.28 | **Asset Class**: Options | **Type**: Volatility

## Overview
The long call synthetic straddle (the same as a long straddle with the put replaced by a synthetic put) amounts to shorting stock and buying two ATM (or nearest ITM) call options with strike K. The trader's outlook is neutral. This is a capital gain strategy. We assume S0 >= K and D > S0 - K.

## Construction
- Short 1 share of stock at S0
- Buy 2 ATM call options at strike K, same expiry

Net debit: D  (assumed D > S0 - K)

## Payoff Profile
f_T = S0 - S_T + 2 × (S_T - K)+ - D

- Upper breakeven: S*_up = 2K - S0 + D
- Lower breakeven: S*_down = S0 - D
- Max profit: P_max = unlimited  (large move in either direction)
- Max loss: L_max = D - (S0 - K)  (at S_T = K; intrinsic offset reduces loss)

## Key Conditions / Signals
- Neutral view; expects a large move in either direction
- S0 >= K (stock at or above the call strike)
- D > S0 - K prevents arbitrage
- Useful when puts are expensive relative to calls (use calls to synthesize the straddle)

## Notes
The short stock position combined with two long calls replicates a straddle by put-call parity. The maximum loss is reduced by the amount S0 - K (intrinsic value of the synthetic put component).