Synthetic Short Call | The Options Guide

A synthetic short call is created when short stock position is combined with a short put of the same series.

Position construction

Short 100 Underlying, Sell 1 ATM Put

The synthetic short call is so named because the established position has the same profit potential a short call.

Limited Profit Potential

Maximum profit

Premium Received - Commissions Paid

Profit achieved when: Price of Underlying <= Strike Price of Short Put

Maximum loss

Unlimited

Loss occurs when: Price of Underlying > Sale Price of Underlying + Premium Received

Loss = Price of Underlying - Sale Price of Underlyingl - Premium Received + Commissions Paid

Breakeven

Sale Price of Underlying + Premium Received