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Synthetic Long Call

A synthetic long call is created when long stock position is combined with a long put of the same series. It is so named because the established position has the same profit potential as a long call.

Married put and protective put strategies are examples of synthetic long calls.

Synthetic Long Call Construction
Long 100 Shares
Buy 1 ATM Put

Unlimited Profit Potential

The formula for calculating profit is given below:

  • Maximum Profit = Unlimited
  • Profit Achieved When Price of Underlying > Purchase Price of Underlying + Premium Paid
  • Profit = Price of Underlying - Purchase Price of Underlying - Premium Paid
Graph showing the expected profit or loss for the synthetic long call option strategy in relation to the market price of the underlying security on option expiration date.
Synthetic Long Call Payoff Diagram

Limited Risk

The formula for calculating maximum loss is given below:

  • Max Loss = Premium Paid + Commissions Paid
  • Max Loss Occurs When Price of Underlying <= Strike Price of Long Put

Breakeven Point(s)

The underlier price at which break-even is achieved for the synthetic long call position can be calculated using the following formula.

  • Breakeven Point = Purchase Price of Underlying + Premium Paid
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