When Should You Use This Strategy?
You want to hold stock for dividends, voting rights, or existing cost basis but still cap downside like a call buyer would
Who Benefits Most?
Stockholders who want call-like risk exposure without liquidating their equity position
Position Setup
The Synthetic Call consists of the following legs:
- Buy 100 shares
- Buy 1 100 strike put at $5 premium
Payoff at Expiration
The chart below shows profit and loss across a range of underlying prices for the default synthetic call setup. Open the interactive calculator to change strikes, premiums, and quantities and see the shape update live.
How Profit and Loss Work
Maximum Profit: Unlimited
Maximum Loss: $500 per default position
Break-even Points: $105
Timing & Time Horizon
30–90 days per put cycle
Most traders enter this strategy 30–60 days before their expected move, allowing enough time for the position to develop while avoiding excessive time decay on shorter-dated options.
Capital Requirements
High: 100+ shares plus put premium, versus the modest premium-only outlay of buying a call outright
How to Manage the Position
Roll the put forward as expiration approaches; compare the recurring put cost against simply buying a call if capital efficiency matters more than share ownership
- Monitor the position daily, especially as it approaches profitability
- Set clear profit targets and exit rules before entering
- Consider closing early to lock in gains rather than waiting for max profit
- Be prepared to cut losses if the thesis is wrong
Key Risks & What to Watch
- Ties up full stock capital unlike an actual long call, which only risks the premium
- Put premium is a recurring cost on every roll
- Dividends and voting rights are the main offsetting benefit versus an outright call
Common Variations
The default setup above is one version of the synthetic call. Traders adjust strike placement to trade off cost, probability, and payout:
ATM synthetic call
Buy the put at a strike near the current stock price for the tightest downside floor.
Key difference: Highest recurring put cost, but the closest match to a true long call's risk profile.
Best for: Shareholders who want the position to behave as closely as possible to owning a call outright.
OTM synthetic call
Buy the put further below the current price, insuring only against a larger drop.
Key difference: Lower recurring cost, but more downside exposure remains before the floor engages.
Best for: Long-term holders who want a cheaper, partial floor rather than full call-equivalent protection.
Frequently Asked Questions
How is this different from just buying a call and selling the stock?
Comparisons
Selling the stock and buying a call would free up capital and remove dividend/voting rights, but this position deliberately keeps the shares — it's for holders who want to retain ownership while capping downside like a call buyer.
Why not just call this a protective put?
Setup
The mechanics are identical to a protective put; the name reflects the intent — replicating a long call's defined-risk profile for a shareholder who has decided to keep their shares rather than liquidate them.
Does this strategy still let me collect dividends?
When to Use
Yes — since the shares are retained rather than sold, you continue to receive dividends and retain voting rights, which is the main reason to choose this over an outright long call.
What's the ongoing cost of maintaining this position?
Adjustments
You pay the put premium every time you roll it forward to a new expiration, similar to a recurring insurance cost — this should be weighed against the benefit of retaining the shares.
Model Before You Trade
Every strategy performs differently based on entry price, strike selection, and premium levels. Use the interactive Synthetic Call calculator to model the payoff with your expected entry, strikes, and premiums before committing capital.
Educational information only. This guide explains how the strategy works mathematically and typically behaves. It is not investment advice, and past performance does not guarantee future results. Options trading involves significant risk, including the potential loss of premium paid. Paper trade or use small positions while learning.