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[Stock]

Synthetic Positions

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Synthetic Positions

Also known as an equivalent position. By using a combination of options or options and stock, traders can create positions that have the same risk/reward characteristics of option only or stock only positions. The following summarizes the most common synthetic positions.

Synthetic long stock
A short put option and a long call option with the same strike and expiration.

Synthetic short stock
A long put option and a short call option with the same strike and expiration.

Synthetic long call
A long put and a long position in the underlying stock.

Synthetic short call
A short put and a short position in the underlying stock.

Synthetic long put
A long call and a short position in the underlying stock.

Synthetic short put
A short call and a long position in the underlying stock

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Buy-write
see Covered Call.

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Covered Call
A short call option position against a long position in an underlying stock or futures.