Synthetic Call

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Dictionary Says

Definition of 'Synthetic Call'

An investment strategy that mimics the payoff of a call option. A synthetic call is created by purchasing the underlying asset, selling a bond and purchasing a put option. The strike price on the put option is equal to the face value of the bond, which serves as the exercise price of the synthetic call.
Investopedia Says

Investopedia explains 'Synthetic Call'

A synthetic call produces the same overall payoff as a call option. The synthetic call will finish in the money when the price of the underlying asset is greater than the face value of the sold bond at the time of expiration.  It will be out-of-the-money when the value of the bond is greater than that of the underlying asset. When the synthetic call is in the money, the profit is the difference between the price of the underlying asset and the face value of the bond.  If the call finishes out of the money, the put option absorbs the loss from the underlying asset, with the exercise price of the put paying for the bond.
Search results for

'Synthetic Call'

  • Synthetic Options Provide Real Advantages

    http://www.investopedia.com/articles/optioninvestor/08/synthetic-options.asp
    ... Being long the cash or futures position and purchasing a put option is known as
    a synthetic call. ... The total cost of the synthetic call position becomes $2,300. ...

  • Put-Call Parity And Arbitrage Opportunity

    http://www.investopedia.com/articles/optioninvestor/05/011905.asp
    ... That's why a long-put/long-stock position is often called a "synthetic long call."
    In fact, the only difference between the two lines, above, is the dividend ...

  • Get Into Low-Cost Futures Trading With Synthetics

    http://www.investopedia.com/articles/optioninvestor/08/synthetic-futures.asp
    ... By taking the process one step further and selling an at-the-money call
    for $2,710, you turn your position into a synthetic short. ...

  • Gamma-Delta Neutral Option Spreads

    http://www.investopedia.com/articles/optioninvestor/07/gamm_delta_neutral.asp
    ... At the same time, conservative strategies like covered-call writing or
    synthetic covered-call writing can be too restrictive. The ...

  • Options Trading Strategies: Understanding Position Delta

    http://www.investopedia.com/articles/optioninvestor/03/021403.asp
    ... delta, which means that if the underlying rises, the short call position will ... in
    trading options is minimized or eliminated when trading synthetic options. ...

  • Principal-Protected Notes: Hedge Funds For Everyday Investors

    http://www.investopedia.com/articles/bonds/07/principal_protected.asp
    ... There are two common structures, which describe how the synthetic investment is
    created, and ... crowd, consists of a zero-coupon bond and a call option package on ...

  • The 4 Advantages of Options

    http://www.investopedia.com/articles/optioninvestor/06/Options4Advantages.asp
    ... We call these positions synthetics. Synthetic positions present investors with multiple
    ways to attain the same investment goals, and this can be very, very ...

  • Hedging Basics: What Is A Hedge?

    http://www.investopedia.com/articles/optioninvestor/07/hedging-intro.asp
    ... with put options or a short seller can hedge a position though call options. Futures
    contracts and other derivatives can be hedged with synthetic instruments. ...

  • CFA Level 1 Study Guide - Fixed Income Investments - Other Types ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/other-types-of-bonds.asp
    ... Options; 14.8 Institutional Investors and Financing Purchases; 14.9 Interest
    Rate Risk; 14.10 Call and Prepayment Risk; 14.11 Reinvestment ...

  • The Truth About Naked Short Selling

    http://www.investopedia.com/articles/optioninvestor/09/naked-short-selling.asp
    ... to Deliver There is another form of short selling, which I describe as synthetic
    short selling ... more than a simultaneous sale of an out-of-the- money call and a ...

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