Combination

A combination is an options position built from both puts and calls on the same underlying stock at the same time, rather than just one type of option by itself. A put is a contract that gives its buyer the right to sell the underlying stock at a set price, and a call gives its buyer the right to buy it at a set price. When a trader holds both kinds of contracts as one strategy, that mixed position is called a combination.

The specific combination changes depending on the strikes and expirations chosen. If both options share the same strike price and expiration, the position is usually called a straddle instead. Once the strikes differ, or one leg is bought while the other is sold, or the expirations don't match, the position falls under the broader "combination" label. A common example is a collar, where a trader who owns the stock buys a put for downside protection and sells a call to help pay for it.

The nuance that trips up beginners is that "combination" is a category, not a single defined strategy the way "straddle" or "iron condor" is. It's a catch-all term traders and platforms use to describe any put-and-call mix that doesn't fit a more specific named structure. So when someone says "I put on a combination," you generally have to ask which strikes and which side (bought or sold) to know what risk they actually have.

Because it mixes puts and calls, a combination's payoff can look very different depending on setup: some profit from a big move in either direction, some profit only if the stock stays range-bound, and some are built mainly to hedge an existing stock position rather than to speculate.