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synthetic short stock

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 … Read the rest