---
description: "A bearish capital-gain strategy (short risk reversal) buying an OTM put at K1 and selling an OTM call at K2 > K1, profiting from a strong downward move."
tags: [options, speculation, bearish, risk-reversal]
---

# Short Combo

**Section**: 2.13 | **Asset Class**: Options | **Type**: Speculation

## Overview
The short combo (a.k.a. "short risk reversal") amounts to buying an OTM put option with strike K1 and selling an OTM call option with strike K2, where K2 > K1. The trader's outlook is bearish. This is a capital gain strategy.

## Construction
- Buy 1 OTM put option at strike K1
- Sell 1 OTM call option at strike K2 (K2 > K1), same expiry

Net debit or credit H (H = D if net debit, H = -C if net credit; K2 > K1)

## Payoff Profile
f_T = (K1 - S_T)+ - (S_T - K2)+ - H

Breakeven depends on sign of H:
- S* = K1 - H  (if H > 0, net debit)
- S* = K2 - H  (if H < 0, net credit)
- K1 <= S* <= K2  (if H = 0, zero-cost)

- Max profit: P_max = K1 - H  (if stock goes to zero)
- Max loss: L_max = unlimited  (stock can rise without bound)

## Key Conditions / Signals
- Strongly bearish outlook
- Traders often structure as zero-cost (H = 0) by selecting K1 and K2 such that premiums offset
- Profits from a large downward move; loses if stock rises above K2

## Notes
The short combo creates a flat zone [K1, K2] where the payoff equals -H. Unlike the short synthetic forward (where K1 = K2 = S0), both strikes are OTM. Unlimited loss potential on the upside due to the short call.