Synthetic Long option strategy
Synthetic Long recreates the payoff of buying the underlying by buying an ATM Call and selling an ATM Put of the same strike and expiry. It moves almost rupee for rupee with the underlying at a fraction of the capital of buying it outright.
Payoff at expiry
Nifty, lot size 65 · Nifty future 25,151 · 17 Nov 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | ATM Call | 25,150 | 1 | 65 | ₹113.32 |
| SELL | ATM Put | 25,150 | 1 | 65 | ₹112.42 |
How it works
- Buy 1 ATM call at the 25,150 strike for ₹113.32, paying the premium.
- Sell 1 ATM put at the 25,150 strike for ₹112.42, collecting the premium.
- You pay a net ₹58 upfront for the position. Losses are not capped.
Below 25,151 you lose, and the loss grows as Nifty falls.
Above 25,151 you profit, and profit keeps growing as Nifty rises.
Set-up: Buy 1 lot ATM Call and Sell 1 lot ATM Put with same expiration date.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 23,650 | −6% | −₹97,559 |
| 24,400 | −3% | −₹48,809 |
| 24,900 | −1% | −₹16,308 |
| 25,150 | Unchanged | −₹58 |
| 25,400 | +1% | +₹16,192 |
| 25,900 | +3% | +₹48,692 |
| 26,650 | +6% | +₹97,442 |
How the Greeks affect it
When to use
When you are strongly bullish and want a futures-like exposure through options.
- Mirrors owning the underlying with low upfront premium.
- Short put premium funds most of the call.
- No time decay drag as the two legs offset each other.
Things to watch
- Downside risk is the same as holding the underlying.
- Short put requires margin.
- Needs a strong directional view.
Synthetic Long: questions
What is a Synthetic Long strategy?
Synthetic Long recreates the payoff of buying the underlying by buying an ATM Call and selling an ATM Put of the same strike and expiry. It moves almost rupee for rupee with the underlying at a fraction of the capital of buying it outright.
When should you use a Synthetic Long?
When you are strongly bullish and want a futures-like exposure through options.
How do you set up a Synthetic Long?
Buy 1 lot ATM Call and Sell 1 lot ATM Put with same expiration date.
What is the maximum profit of a Synthetic Long?
Unlimited as the underlying rises above the strike plus the net debit.
What is the maximum loss of a Synthetic Long?
Substantial if the underlying falls, since the short put loses as the price drops. Loss equals the fall below the strike plus or minus the net premium.
What is the breakeven of a Synthetic Long?
With Nifty at 25,151, the example on this page breaks even at 25,151 at expiry.