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synthetic short put
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 Category: synthetic futures and option strategies
 Published on Thursday, 18 February 2010 19:32
synthetic short put
a synthetic short put is created when long stock position is combined with a short put of the same series. it is so named because the established position has the same profit potential a short call.
synthetic short put construction

long 100 shares

sell 1 at the money put

the covered call is a popular example of a synthetic short put.
limited profit potential
the formula for calculating maximum profit is given below:
 max profit = premium received  commissions & fees
 max profit achieved when price of underlying >= strike price of short call
unlimited risk
the formula for calculating loss is given below:
 maximum loss = unlimited
 loss occurs when price of underlying
 loss = purchase price of underlying  price of underlying  premium received + commissions & fees
breakeven point(s)
the underlier price at which breakeven is achieved for the synthetic short put position can be calculated using the following formula.
 breakeven point = purchase price of underlying  premium received  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