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Explain the Concept of a “Synthetic Long Stock” Position.

A Synthetic Long Stock position is a combination of options contracts that replicates the risk/reward profile of owning the underlying asset (long stock). It is created by simultaneously buying an At-the-Money (ATM) Call option and selling an ATM Put option with the same strike price and expiration date.

This is based on the principle of Put-Call Parity.

How Does Selling a Put Option Relate to the Risk of a Covered Call (Put-Call Parity)?
What Is the ‘Put-Call Parity’ Theorem and Its Importance in Derivatives Pricing?
How Is a ‘Synthetic Long Call’ Constructed Using the Underlying Asset and a Put Option?
How Does a Dividend Payment Affect the Put-Call Parity Relationship?