What Is the Synthetic Position Created by Combining a Long Call and a Short Put?
Combining a long Call option and a short Put option, both with the same strike price and expiration date, creates a synthetic long position in the underlying asset (synthetic long stock). The payoff profile of this combination is identical to the payoff of owning the stock itself.
This is a direct consequence of the Put-Call Parity theorem.
Glossar
Synthetic Long Stock Position
Position ⎊ A Synthetic Long Stock Position is a derivative construction that precisely replicates the linear profit and loss profile of owning the underlying cryptocurrency asset.
Synthetic Long Stock
Framework ⎊ A synthetic long stock, within the context of cryptocurrency derivatives, represents a strategy designed to mimic the payoff profile of a direct equity holding, but achieved through the utilization of options contracts.
Synthetic Long Position
Position ⎊ A synthetic long position in cryptocurrency derivatives, particularly options, replicates the payoff profile of owning the underlying asset without direct ownership.
Long Call Option
Derivative ⎊ A long call option, within the cryptocurrency context, represents a financial derivative granting the holder the right, but not the obligation, to purchase an underlying digital asset at a predetermined price (the strike price) on or before a specific date (the expiration date).
Synthetic Position
Construction ⎊ A synthetic position, within cryptocurrency derivatives, represents the replication of an asset’s price exposure through a combination of offsetting positions, rather than direct ownership.
Short Put
Position ⎊ A Short Put represents a bullish or neutral market position established by an options seller, or writer, who receives a premium in exchange for accepting the obligation to purchase the underlying cryptocurrency asset at a specified strike price.