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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:

- Maximum Profit = Unlimited
- Profit Achieved When Price of Underlying < Sale Price of Underlying - Premium Paid
- Profit = Sale Price of Underlying - Price of Underlying - Premium Paid

Synthetic Long Put Payoff Diagram

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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 Call

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

- Breakeven Point = Sale Price of Underlying - Premium Paid

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