Options Strategies
Synthetic Long Call
Strategies Long Put + Long Stock (Also referred to as Synthetic Long Call)
Component Buy stock and buy at-the-money put
Potential Profit
  • When the stock price is above the break-even point
  • Unlimited and equals to stock price minus the break-even point
Maximum Loss
  • When the stock price is below the break-even point
  • Limited to the premium paid
Time Value Impact Negative
Break-even Strike price plus premium paid
Remarks Compared with buying stock only, the downside risk is limited by the Long Put Position.
Example
  Net Position +1 Stock at 200 +1 Feb 200 Put

Component Buy ABC Feb $200 Put, pay $20, and buy ABC stock at $200
Net Premium Pay $20
Break-even $200+$20=$220
Profit when Stock price is above $220
Potential Profit Stock price - $220
Potential Loss $20
Time Value Impact Negative

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