I'm a little rusty on these topics so take with a grain of salt. Nothing I say here should be taken as authoritative.
I assume many members of the forums know this stuff better than me and can spot multiple errors in what I say below, if they can be bothered to write them here.
you saying: tagoma
: "allowed to trade options only, long and short, and these are basic calls and puts
is really not enough detail for someone to answer your questions in a manner focused/directed upon your specific interests.
Question: Did you mean to say "allowed to BUY options only
" (that could imply a margin trading account is not part of the context for these questions. If so, then synthetic futures are likely off the table, as are many other types of multi-legged options positions.)
Hypothetically, it might be conceivable to write covered-calls in a cash account, though I've no experience in seeing anyone actually do that.
Aside from that, you can't sell/write/short options contracts in a cash account; only buy contracts.
OK, you probably should stop reading there. The remainder is TL;DR. Read further at your own peril
Whether or not you have a margin account for trading options will affect which types of positions you can enter at any broker.
The amount of margin capital you have allocated for this trading account and the amount of credit your broker will allow based on that capital will also affect the kinds of positions your particular broker will allow you to enter.
Different legs of a position will tie up differing amounts of your margin capital.
An unlevered buy (go long) of a contract paid for with cash and not using a penny of margin; a broker will let you buy as many of those as you have unallocated trading capital to pay for, up to any regulatory limits.
That capital is now tied up and mostly/partly unavailable to use as capital pledged towards margined trades.
Some brokers will let you use some portion of that invested capital to pledge towards your basis for the size of other levered/margined positions they let you put on.
OK, so far most of the above is probably not new to you, but was a lead up to the following bit that might be new for you.
Where options starts to have some new concepts thrown in is that many brokers may let you lever much more heavily for positions such as: for the same underlying stock buy one put and sell another put (or same thing for calls).
Now if for that same underlying stock you put on a 4-legged position buy 1 put, sell 1 put, buy 1 call, sell 1 call, then you've effectively created a position with a pair of synthetic futures, one long & one short. The difference for the two synthetics could be either strike price or expiration dates, but potentially heavily levered with only modest capital being allocated towards the margin on this trade.
You could then do the same thing for the other underlying stock, but in the opposite direction.
Q: would I actually advocate anyone to do this?
A: No, not for most people, especially not for novices. (for multiple reasons)
An 8-legged position like this incurs multiple disadvantages:
1) You eat the cost of the bid/ask spread potentially up to 8 times, not just once or twice.
(I've never sold a put contract so I don't know how losses work on the B/A spread)
2) There's a good chance you won't find your preferred contract at a reasonable price for each of the 8 legs, so you either must accept an inferior price, or substitute an alternate contract for that leg.
3) you are exposed to theta for your multiple long legs, hopefully offset by theta on your multiple short legs.
4) broker commission times 8, rather than times 1.
5) your broker might accept the order to put on this multi-legged trade, but not have the ability to fully execute it.
6) your broker might refuse to accept such an order from a small-fry or new account, or if they don't think you've got the ability to stay on top of it.
7) a highly-levered multi-legged position exposes you to volatility for each of the legs. The allowed higher leverage is predicated upon an assumption that volatility will average out for a smoother overall volatility. However, hypothetically there could be brief times when a few legs have wild swings not fully offset by other legs. Hypothetically, this could result in a margin call