Synthetic Short Straddle – A Closer Look at Short Call and Short Put Variants

Many traders know the short straddle, but fewer explore the synthetic version. A synthetic short straddle gives you the same payoff using either a short call or a short put setup—each with a different position in the underlying. Why use one over the other? That’s what this article breaks down.

Key Takeaways

• A synthetic short straddle is a non-directional options strategy that can be built in two ways: by using a short call synthetic setup or a short put synthetic setup.
• Short call synthetic straddle uses long stock + 2x short calls, while the short put synthetic straddle uses short stock + 2x short puts.

What Is a Synthetic Short Straddle?

A synthetic short straddle is a non-directional options strategy built in one of two ways: either through a short call synthetic setup or a short put synthetic setup. The goal is the same as a traditional short straddle—to profit if the stock stays near the strike price—but the construction is different.

Typically, the profit and loss (P&L) chart of a synthetic short straddle will look like this:

Notice that the shape will easily remind you of a standard short straddle (available on our options screener), it is basically a synthetic straddle, but reversed. However, instead of combining a short call and a short put, the synthetic short straddle uses, as suggested by the name, synthetic legs. Each leg of the classic straddle can be replaced by a synthetic equivalent:

• A short put can be replaced by long stock + short call
• A short call can be replaced by short stock + short put

Short Call Synthetic Straddle

The short call synthetic straddle uses long stock and two short calls to mimic a traditional short straddle. It works by replacing the short put leg with a synthetic short put—made by combining long stock with a short call. The result is a position with limited profit near the strike and unlimited risk if the stock rallies.

This setup gives you a similar payoff to a standard short straddle but leans slightly bullish because you're long the stock. If the price stays near the strike, both short calls decay, and you keep the premium. But if the stock rips higher, the losses can pile up quickly.

Setup Details for This Synthetic Short Straddle with Calls

To build a short call synthetic straddle:

• Buy 100 shares of stock
• Sell 2 call options at the same strike

The size matters here: you generally need to short two calls for every 100 shares you buy of a stock.

Example Trade

You can trade a synthetic short straddle like this using our custom scan feature. Let’s say NVDA is currently trading at $131.29. To build a synthetic short straddle at the 131 strike:

• Buy 100 shares of NVDA
• Sell 2 NVDA 131-strike call options, expiring in a week.

This setup creates a short call synthetic straddle, with capped profit if NVDA stays near $131 (close to $1,000), and significant downside if it moves sharply. Here is the P&L chart of this short call synthetic straddle:

As shown in the P&L chart, the breakeven points of your strategy are $120.59 and $141.41. If NVDA moves outside this range, losses can accelerate quickly.

Pros and Cons

• Pros: Easier margin with long shares, works best in neutral-to-slightly-bullish setups, and reaches its max profit if the stock price remains stable.
• Cons: Needs capital to buy shares, unlimited loss on upside and downside moves, and short calls can be exposed if volatility spikes.

This version of the synthetic short straddle is best when you think the stock will stay flat—or rise just a little.

Short Put Synthetic Straddle

The short put synthetic straddle uses a short stock position and two short puts to replicate a traditional short straddle. Instead of using a short call, this setup builds a synthetic short call—made up of short stock and a short put. The result behaves like a short straddle: profit is capped, risk is unlimited, and the best-case scenario is when the stock stays near the strike.

This version leans bearish due to the short underlying position. If the stock tanks, losses can get out of hand fast.

Setup Details for This Synthetic Short Straddle with Puts

To set up a short put synthetic straddle:

• Short 100 shares of stock
• Sell 2 put options at the same strike

The put contracts must cover double the short stock to balance the position and replicate the short call leg.

Example Trade

You can trade a synthetic short straddle like this using our custom scan feature. Let’s say META is currently trading at $627.06. To build a synthetic short straddle at the 625 strike:

• Short 100 shares of META
• Sell 2 META 625-strike put options, expiring in a week.

This setup creates a short put synthetic straddle, with capped profit if META stays near $625 (close to $2,000), and significant downside if the stock makes a sharp move. Here is the P&L chart of this short put synthetic straddle:

As shown in the P&L chart, the breakeven points of your strategy are $604.54 and $645.46. If META moves outside this range, losses can escalate quickly.

Pros and Cons

• Pros: Bearish delta bias, often lower upfront capital than long stock setups, good strategy to collect a limited profit in a relatively calm market scenario.
• Cons: Shorting stock isn’t always easy, the volatility risk can be severe, and the strategy may suffer unlimited losses if the underlying asset price moves significantly

This version of the synthetic short straddle might suit traders expecting sideways-to-slightly-bearish movement.

Comparing the Two Variants

When options are fairly priced, both types of synthetic short straddle offer the same risk and reward profile: limited profit and unlimited loss. The key difference is how each one gets there. One uses long stock and short calls. The other uses short stock and short puts. Same payoff, different tools—and those tools can affect execution.

Here’s how they compare in practice:

• Underlying position: The short call synthetic straddle is long the stock, while the short put version is short. This changes your exposure and how you manage the trade.
• Margin: Long stock often requires more capital upfront, but brokers may offer better margin terms than for shorting.
• Dividends: If you’re long stock, you might receive dividends. If you’re short, you could be on the hook for paying them.
• Ease of execution: Shorting stock can be tough. You need borrow availability, and sometimes it just isn’t there.

Which One Fits Your Situation?

Let’s say stock ABC is trading at $100. If you have the capital and prefer holding shares, you might go with the short call synthetic straddle: long 100 shares, sell 2 calls. If you’re comfortable shorting and want to commit less capital, you could use the short put version: short 100 shares, sell 2 puts. The choice often comes down to:

• Your directional bias (slightly bullish? Use the call version since you will go long on the underlying stock. Slightly bearish? Go with the put version, since you’re shorting the shares in this setup)
• Your capital and margin availability
• How easy it is to short the stock

If you like synthetic strategies, you can find different setups for you on our blog, such as the synthetic put.