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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.

Synthetic Long Call Construction
Long 100 Underlying
Buy 1 ATM Put

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

Profit Graph for the Synthetic Long Call Options Trading Strategy

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

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 can be calculated using the following formula.

  • Breakeven Point = Purchase Price of Underlying + Premium Paid