Synthetic Stock Positions 
Created by Puts and Calls 
It is possible for a strategist to establish a position that is essentially the same as a 
stock position, and he can do this using only options. The option position generally 
requires a smaller margin investment and may have other residual benefits over sim­
ply buying stock or selling stock short. In brief, the strategies are summarized by: 
1. Buy call and sell put instead of buying stock. 
2. Buy put and sell call instead of selling stock short. 
SYNTHETIC LONG STOCK 
When one buys a call and sells a put at the same strike, he sets up a position that is 
equivalent to owning the stock. His position is sometimes called "synthetic" long 
stock. 
Example: To verify that this option position acts much like a long stock position 
would, suppose that the following prices exist: 
XYZ common, 50; 
XYZ January 50 call, 5; and 
XYZ January 50 put, 4. 
If one were bullish on XYZ and wanted to buy stock at 50, he might consider the 
alternative strategy of buying the January 50 call and selling (uncovered) the January 
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