Name: Synthetic Short Stock
Description: This play replicates going short on an underlying. This play has several advantages over shorting the underlying. With options you will have better leverage and the margin will not be less than shorting the underlying. The disadvantage here is that the options have an expiration when the underlying does not.
Setup: Sell (short) Strike A call and Buy (long) Strike A put
Break-Even: Strike A + Credit received or - Debit paid
Max Profit: Limited: Underlying can only go to $0.00
Max Loss: Unlimited if the underlying climbs
Margin: Margin equals the requirement for the short call
Time Decay: Time decay is a neutral effect. It will have a positive effect on the short call but a negative effect on the long put
Implied Volatility: The effect of implied volatility is neutral. It will have a positive effect on the long put but a negative effect on the short call
Notes: None at this time
Featured in Trade Review: None at this time
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