Synthetic Short
Composition
Long (buy) one put option and shorting (sell) one call option at the same month and same strike price.
Risk/Reward
Max Reward: Unlimited
Max Risk: Unlimited
Characteristics
The synthetic short stock position is used when the investor is bearish on market direction. The synthetic short behaves exactly the same as being short 100 shares of the underlying security. It is a much more cost effective than shorting the stock outright.
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