Short Combo
Description
Selling an out-of-the-money call and buying an out-of-the-money put, a cheaper, more leveraged stand-in for a short stock position.
Setup
- Sell one out-of-the-money call.
- Buy one out-of-the-money put, same expiry.
Context
Used as a lower-cost, higher-leverage alternative to shorting the underlying outright, when a decline is expected and the gap between the strikes is an acceptable dead zone.
Risk Profile
Below the put strike, gain grows as the underlying falls, bounded only by zero. Above the call strike, loss grows without bound. Between the strikes, the position is flat at its net cost.
Pros
- Avoids the mechanics of borrowing the underlying to short it.
- Large gain potential on a decline.
- Can often be set up for a small credit or low cost.
Cons
- Uncapped upside risk above the call strike.
- Flat zone between the strikes means no gain from small moves.
- Assignment risk on the short call before expiry.
Effect of Time
Time decay has a modest net effect, since the two legs partially offset each other.
Effect of Volatility
A change in implied volatility has a limited net effect, since the call and put move in opposite ways that partially cancel out.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Short | Call | 1 | $85000.0000 | 24 Sep 2026 | $80.2236 | $67.5568 | $10.0280 |
| Long | Put | 1 | $84000.0000 | 24 Sep 2026 | $105.5574 | $118.2243 | $13.1947 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $83000.0000 | $1000.0000 | $974.6662 | +3847.3% |
| $83974.6662 breakeven | $25.3338 | $0.0000 | +0.0% |
| $84000.0000 | $0.0000 | -$25.3338 | -100.0% |
| $84445.9400 current | $0.0000 | -$25.3338 | -100.0% |
| $85000.0000 | $0.0000 | -$25.3338 | -100.0% |
| $86000.0000 | -$1000.0000 | -$1025.3338 | -4047.3% |