Bullish Patterns
Long Calls
Bull Call Spread
Bull Put Spread
Call Backspread
Long Call Ratio Spread
Naked Put
Synthetic Long Stock
The Collar
Covered Calls
Synthetic Long Call
Synthetic Short Put
Covered Straddle
Covered Strangle
Married Put
Protective Put

Bearish Patterns
Long Puts
Bear Put Spread
Bear Call Spread
Put Backspread
Long Put Ratio Spread
Naked Calls
Synthetic Short Stock
Synthetic Short Stock (split strikes)
Covered Put
Protective Call
Synthetic Short Call
Synthetic Long Put

Long Volatility
Long Straddle
Long Strangle
Short Call Butterfly
Short Put Butterfly
Short Iron Butterfly
Short Call Condor
Short Put Condor
Short Iron Condor
Long Guts
Short Call Ladder
Short Put Ladder
Long Call Synthetic Straddle
Long Put Synthetic Straddle

Short Volatility
Short Straddle
Short Strangle
Long Call Butterfly
Long Put Butterfly
Long Iron Butterfly
Long Call Condor
Long Put Condor
Long Iron Condor
Short Guts
Long Call Ladder
Long Put Ladder
Call Ratio Spread
Short Call Ratio Spread
Put Ratio Spread
Short Put Ratio Spread
Ratio Call Write
Ratio Put Write
Short Call Synthetic Straddle
Short Put Synthetic Straddle
Variable Ratio Write

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Short Put Synthetic Straddle

Risk: unlimited
Reward: limited

General Description
Entering a short put synthetic straddle entails selling (2) puts for every 100 shares of stock you are short. It's the same as a ratio put write, and its risk profile is identical to a short straddle.

(draw a short put synthetic straddle risk diagram here)

The Thinking
You are short a stock and confident it will trade in a tight range and won't move much from its current level. To profit from a lack of movement, selling options, which benefit from time decay, is a good route to go. If the stock moves up a little or down a little, you'll profit. It would take a relatively big move for the trade to lose you money.

XYZ is at $55.00. You short 100 shares of stock at $55.00 and then sell (2) 55 puts for $3.50 each. The net credit is $7.00, not including the stock.

If the stock closed at $55 on expiration day, the puts expire worthless, and your profit is the net credit received.

If the stock rallies, the puts will expire worthless, and the short stock position will lose you money point-for-point with the underlying. For example, at $65, the puts will expire worthless ($3.50 gain per contract), and the short stock position will be down $10. The net is a $3.00 loss.

If the stock drops, the profit from the short stock will be countered by the loss from one of the short puts, and the other short put will continue to lose you money point-for-point with the underlying. For example, at $45, the short stock position will be up $10, and the 55 puts will be worth $10 ($6.50 loss per contract). The net is a $3.00 loss.

The PL chart below graphically shows where this trade will be profitable and at a loss.