Why can't we just combine multiple options strategies to get an always profitable scenario?
For example by combining protective call and protective put won't we be able to get an always profitable scenario?
In theory, no. In practise, occasionally.
In theory if the market is working correctly the price of a matched put and call in the same stock should align such that there is no profit in buying both. The same goes for any other set of options which are trying to cover all possible outcomes (or indeed for trying to bet on all the runners in a horse race!).
In practise markets aren't perfect and sometimes prices of opposing options will diverge such that there is a small profit to be made. There are people who make a living hunting these opportunities down, and it has a name - arbitrage.
Arbitrage opportunities tend be very short lived; by their very nature they stimulate trades in the affected assets in such a way that they tend to realign the prices towards equilibrium. Being essentially mechanical they are also relatively easy for computerised trading systems to spot and exploit when they do arise.
I think that there's a lot of confusion in the replies to this question, other than Joe Taxpayer who realized that buying a put and a call has a 'sunk cost' and that's the risk in the position.
Editing a bit, the question was:
Why can't we just combine a protective put (PP) and a protective call (PC) to get an always profitable scenario?
Let's assume that these options have the same strike price and expiration.
There are two ways to analyze this. The long way is:
PP = (+ 100 XYZ + 1 put)
PC = (- 100 XYX + 1 call)
Add them together and you have:
PP + PC = (+ 100 XYZ + 1 put) + (- 100 XYX + 1 call)
PP + PC = (+ 1 put + 1 call) which is a long straddle.
If the strike prices were different, it would be a long strangle.
Options cost money. Therefore, straddles and strangles have a debit cost and therefore there can never be "an always profitable scenario."
The short way to do this is to understand the Synthetic Triangle which states that there 6 basic synthetic positions relating to combinations of puts, calls and their underlying stock:
Synthetic Long Stock = Long Call + Short Put
Synthetic Short Stock = Short Call + Long Put
Synthetic Long Call = Long Stock + Long Put
Synthetic Short Call = Short Stock + Short Put
Synthetic Short Put = Long Stock + Short Call
Synthetic Long Put = Short Stock + Long Call
(3) is a Protective Put and is equal to buying a call.
(6) is a Protective Call and is equal to buying a put.
There is no arbitrage involved in any of this.
I have actually seen that happening, intentionally.
In Germany, if you put money into a savings account and get interest, you pay tax on the interest. If you buy options and make money or lose money, that's similar to gambling and tax free.
So some enterprising investment company sold capped options betting that the dollar would go up, plus capped options betting that the dollar would go down, cleverly calculated so that no matter where the dollar went, the buyer would make money, slightly less than the usual interest rate - but tax free. German inland revenue closed it down.