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.
|Synthetic Long Call Construction|
|Long 100 Shares|
Buy 1 ATM Put
The formula for calculating profit is given below:
The formula for calculating maximum loss is given below:
The underlier price at which break-even is achieved for the synthetic long call position can be calculated using the following formula.
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