A synthetic long put is created when short stock position is combined with a long call of the same series.
The synthetic long put is so named because the established position has the same profit potential as long put.
|Synthetic Long Put Construction|
|Short 100 Shares|
Buy 1 ATM Call
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 put position can be calculated using the following formula.
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