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7.3. Synthetic Put

ProficiencyDirectionVolatilityAsset LegsMax RiskMax RewardStrategy Type
N/A+
NoviceBearish • Short StockCappedUnCappedCapital Gain
   • Long Call   


7.3.1. Description

Effectively an insurance policy for covering a short position, the Synthetic Put is the opposite of a Synthetic Call. Basically, we short the stock and buy an ATM or slightly OTM (higher strike) call. The net effect is that of creating the same shape as a standard Long Put but with the same leverage as shorting the stock, and we create a net credit instead of a net debit.


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