Synthetic Short Stock
Description
Selling a call and buying a put at the same strike and expiry, replicating the payoff of a short position in the underlying without shorting it directly.
Setup
- Sell one call at the money.
- Buy one put at the same strike and expiry.
Context
Used to gain short exposure without borrowing the underlying, or where shorting the underlying directly is restricted or costly.
Risk Profile
Behaves like a short position in the underlying: gain grows as the underlying falls, bounded by zero; loss grows without bound as it rises.
Pros
- Avoids the mechanics of borrowing the underlying to short it.
- Delta-one exposure: moves closely track the underlying, inverted.
- Can be used to arbitrage a mispricing between the synthetic and the real underlying.
Cons
- Carries the same uncapped upside risk as shorting the underlying.
- Assignment risk on the short call before expiry.
- Bid-ask spreads on two legs instead of one instrument.
Effect of Time
Time decay has little net effect: the long put's decay is largely offset by the short call's decay.
Effect of Volatility
A change in implied volatility has little net effect, since the call and put move in opposite ways that largely cancel out.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Short | Call | 1 | $84500.0000 | 24 Sep 2026 | $262.0958 | $236.7317 | $25.3641 |
| Long | Put | 1 | $84500.0000 | 24 Sep 2026 | $211.3675 | $236.7316 | $25.3641 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $67600.0000 | $16900.0000 | $16950.7283 | +33414.8% |
| $84500.0000 current breakeven | $0.0000 | $50.7283 | +100.0% |
| $101400.0000 | -$16900.0000 | -$16849.2717 | -33214.8% |