Option Strategies – Synthetic Short (risk conversion)
Option Strategies – Synthetic Short (risk conversion)
The synthetic short stock options strategy consists of simultaneously selling a call option and buying the same number of put options at the same strike price. Both options must be in the same expiration cycle. As the strategy’s name suggests, a synthetic short stock position replicates shorting say 100 shares of stock.
Synthetic Short Stock Strategy Characteristics
Synthetic Short Strategy ‘s general characteristics:
Max Profit Potential – it defined by below where the selling and buying the same strike price can result in debit or credit net premium. Breakeven point is simple as explained below
Max Loss Potential: Unlimited
Expiration Breakeven
If the synthetic is entered for a debit premium then breakeven … Read the rest