Strategies |
Long Call + Short Stock (Also referred to as Synthetic Long Put) |
Component |
Short stock and buy at-the-money call |
Potential Profit |
- When the stock price is below the break-even point
- Substantial, equals to the break-even point minus stock price
|
Maximum Loss |
- When the stock price is above the break-even point
- Limited to the premium paid
|
Time Value Impact |
Negative |
Break-even |
Strike price minus premium paid |
Remarks |
Compared with short-selling on stock only, the upside loss potential is limited by the Long Call Position. |