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7.2. Synthetic Call

ProficiencyDirectionVolatilityAsset LegsMax RiskMax RewardStrategy Type
N/A+
NoviceBullish • Long StockCappedUnCappedCapital Gain
   • Long Put   


7.2.1. Description

I know we touched on this before, but...have you ever taken a red-hot stock tip? Did you buy the stock? Did it go up or down? If it went down, I'll bet you wished you'd bought some insurance! Well, that's what a Synthetic Call is. Basically, we buy the stock, but we insure against a downturn by buying an ATM or slightly OTM (lower strike) put. The net effect is that of creating the same shape as a standard long call but with the same leverage as buying the stock.


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