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.