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synthetic long put
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 Category: synthetic futures and option strategies
 Published on Thursday, 18 February 2010 19:34
synthetic long put
a synthetic long put is created when short stock position is combined with a long call of the same series.
synthetic long put construction

short 100 shares

buy 1 at the money put

the synthetic long put is so named because the established position has the same profit potential as long put.
unlimited profit potential
the formula for calculating profit is given below:
 maximum profit = unlimited
 profit achieved when price of underlying
 profit = sale price of underlying  price of underlying  premium paid  commissions & fees
limited risk
the formula for calculating maximum loss is given below:
 max loss = premium paid + commissions & fees
 max loss occurs when price of underlying = strike price of long call
breakeven point(s)
the underlier price at which breakeven is achieved for the synthetic long put position can be calculated using the following formula.
 breakeven point = sale price of underlying  commissions & fees
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Please be aware that trading futures and options involves substantial risk of loss and is not suitable for all investors.
Past performance is not necessarily indicative of future results.
A DIVISION OF FOURTH RIGHT COMMUNICATIONS, L.L.C.
Privacy Policy