synthetic call

Option Strategy: Protective Call/Synthetic Long Put

If investors are of the view that market will go down or bearish but want to protect against an unexpected rise in the price of the stock. Suppose XYZ Ltd is trading at Rs 4457 in January. An investor Mr. A buys a Rs 4500 Call Option for Rs 100 while shorting the stock at Rs 4457. The Net credit of investor is Rs 4357 (Rs 4457- Rs 100). Strategy: Short Stock + Buy Call Option Risk is Limited  Maximum Risk(Rs 143) = Call strike Price (Rs 4500)- Stock Price (4457) +100. Rewards= Maximum is stock price-call Premium. Other Option Strategies Long Combo: Sell a Put, Buy a Call Covered C...
Read More

Option Strategy: Buy stock, Buy Put, Synthetic Call

After discussing Long Call and short Call strategy, the next strategy for option trading strategy is Buy stock and Buy Put. This is a low-risk strategy, traders can limit the loss in case of fall in the market, but potential profit  is unlimited. In this strategy, we purchase a stock since we feel bullish about it but what if the price of stock went down..... you wish you had some insurance against price fall,  so buy a put on the stock this give you right sell on stocks at a certain price which is the strike price. The strike price can be the price at which you bought the stock (ATM strike...
Read More