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Option strategies – Synthetic Long ( risk reversal)

What is  Synthetic Long ( risk reversal) Option strategies?

A synthetic long Option strategy is for options trading that is designed to mimic a long stock position. Traders create a synthetic long asset by purchasing at-the-money (ATM) calls and then selling an equivalent number of ATM puts with the same date of expiration.

Synthetic long assets carry an infinite amount of risk, but they also carry an infinite amount of potential return. The synthetic long asset position is a less expensive approach to trade than buying a comparable number of shares of the underlying stock outright. Because the cost of the call options is at least partially offset by the money obtained for selling the … Read the rest