Short
Combination
...or
Write Combination (uncovered)
Position |
Type |
Strike |
Expiration |
Quantity |
Short |
Put |
OTM (-1) |
Long term |
1 |
Short |
Call |
OTM (+1) |
Long term |
1 |
| Example: | ||||
| Short 1 Oct 55 Put @ 2 3/16 Short 1 Oct 65 Call @ 3 1/8 |
||||
Opinion:
Neutral
A Short Combination is the same as a Short Straddle with one difference. Instead of using options with the same strike price, the investor uses two OTM options in the hope of limiting losses if wrong about XYZ remaining near $60. Initial credit smaller than Short Straddle. Maximum profit occurs with XYZ between strikes.