Long Synthetic (Synthetic Put)
Definition of 'Long Synthetic (Synthetic Put)'
The long synthetic put is a bearish strategy because it profits from a decline in the price of the underlying asset. If the price of the underlying asset falls, the long call will increase in value, while the short put will decrease in value. The net result is a profit for the holder of the long synthetic put.
The long synthetic put is often used as a hedge against a long position in the underlying asset. For example, an investor who owns 100 shares of stock may buy a long synthetic put to protect their investment from a decline in the stock price. If the stock price falls, the long synthetic put will offset the losses on the stock position.
The long synthetic put can also be used as a speculative investment. An investor who believes that the price of an underlying asset is going to decline may buy a long synthetic put in the hope of making a profit.
The long synthetic put is a relatively complex strategy, and it is important to understand the risks involved before using it. The investor should be aware that the long synthetic put can lose money if the price of the underlying asset rises.
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