Bought January 2012 Synthetic Long on Broadcom (BRCM) at $45 strike. Bought Jan 2012 $30/60 Risk Reversal as well
March 30, 2011 · Posted in Trades, US Options
Trade Reasoning:
Takes advantage of leveraging by doing a synthetic instead of just longing the actual stock.
Choosing OTM Call (ATM Put) is because we are bullish and that way we would be receiving net credit of the whole trade. The payout is very similar if we choose ATM Call (OTM Put) strike at $40 for a net debit.
Buying a Risk Reversal because we believe it will not go above $60, and giving us a downside protection at $30.
Breakdown of the trade:
Synthetic Long :
Bought Jan12 $45 Call @ $3.38
Sold Jan12 $45 Put @ $7.58
Risk Reversal:
Bought Jan12 $30 Put @ $1.46
Sold Jan12 $60 Call @ $0.52
Net Credit : $3.26
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