Synthetic Short option strategy
Synthetic Short recreates the payoff of shorting the underlying by selling an ATM Call and buying an ATM Put of the same strike and expiry. It gains almost rupee for rupee as the underlying falls.
Payoff at expiry
Nifty, lot size 65 · Nifty future 25,151 · 17 Nov 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| SELL | ATM Call | 25,150 | 1 | 65 | ₹112.43 |
| BUY | ATM Put | 25,150 | 1 | 65 | ₹111.53 |
How it works
- Sell 1 ATM call at the 25,150 strike for ₹112.43, collecting the premium.
- Buy 1 ATM put at the 25,150 strike for ₹111.53, paying the premium.
- You receive a net ₹59 upfront for the position.
Below 25,151 you profit, and profit grows as Nifty falls.
Above 25,151 you lose, and the loss keeps growing as Nifty rises.
Set-up: Sell 1 lot ATM Call and Buy 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% | +₹16,309 |
| 25,150 | Unchanged | +₹59 |
| 25,400 | +1% | −₹16,192 |
| 25,900 | +3% | −₹48,691 |
| 26,650 | +6% | −₹97,442 |
How the Greeks affect it
When to use
When you are strongly bearish and want a short futures-like exposure through options.
- Mirrors a short position with low upfront premium.
- Short call premium funds most of the put.
- No time decay drag as the two legs offset each other.
Things to watch
- Upside risk is uncapped.
- Short call requires margin.
- Needs a strong directional view.
Synthetic Short: questions
What is a Synthetic Short strategy?
Synthetic Short recreates the payoff of shorting the underlying by selling an ATM Call and buying an ATM Put of the same strike and expiry. It gains almost rupee for rupee as the underlying falls.
When should you use a Synthetic Short?
When you are strongly bearish and want a short futures-like exposure through options.
How do you set up a Synthetic Short?
Sell 1 lot ATM Call and Buy 1 lot ATM Put with same expiration date.
What is the maximum profit of a Synthetic Short?
Substantial as the underlying falls below the strike, up to the strike less the net debit.
What is the maximum loss of a Synthetic Short?
Unlimited if the underlying rises, since the short call loses as the price climbs.
What is the breakeven of a Synthetic Short?
With Nifty at 25,151, the example on this page breaks even at 25,151 at expiry.