Long Combo
A combination strategy that expresses a directional view with controlled structure (often call/put combo).
Conceptual use
Combos are built to shape payoff—reduce premium, change breakevens, or create asymmetric profiles. The exact legs depend on your objective.
Tip
If you cannot draw the payoff diagram, simplify the strategy first.
Practical deep‑dive
Info
Profile
Best suited for neutral or income/hedging objectives depending on structure.
Strategy snapshot (quick)
| Field | Value |
|---|---|
| Style | single long |
| Cost type | Typically a debit-style structure (you pay premium). |
| Best when | You have direction + timing conviction and want strictly limited downside (premium). |
| Watch out | Theta decay and IV crush can reduce premium even if direction is right. |
Greeks to watch
Focus on these exposures first
| Greek | Why it matters |
|---|---|
| Delta | Directional exposure |
| Theta | Time decay (especially near expiry) |
| Vega | Premium sensitivity to IV |
Professional options traders focus on “structure first”: define risk, choose strikes/liquidity, and write down exit rules before entry. Most losses come from oversized positions and holding short-dated options without a plan.
Execution checklist
Use this before placing the trade
| Check | Why it matters | Quick test |
|---|---|---|
| Liquidity | Spreads can eat edge | Tight bid‑ask + decent volume/OI |
| Risk defined | Prevents blow-ups | Max loss is known and acceptable |
| Time horizon | Avoid time mismatch | Expiry matches your view timeframe |
| Volatility regime | Premium cost changes outcomes | IV not extreme vs recent range |
| Exit plan | Stops emotional decisions | Target/stop/time exit written down |
Mistakes to avoid
- Trading illiquid strikes (wide spreads) because premium looks “cheap”.
- Using market orders during fast moves and getting poor fills.
- Adding to losing positions without a predefined rule.
- Ignoring event risk (results, policy events) near expiry.
- Overusing weekly expiries before mastering risk control.
Summary (takeaways)
- Prefer defined-risk structures while learning.
- Liquidity and execution quality matter as much as strategy selection.
- Consistency comes from process, not predictions.