Synthetic
Long

What it is

A synthetic long buys an ATM call and sells an ATM put at the same strike and expiry. The combination behaves exactly like being long the underlying (or its future): profit rises one-for-one as price climbs and falls one-for-one as it drops. It's a fully directional bullish position with virtually no premium outlay.

Key facts

• Market view: outright bullish, equivalent to going long futures.
• Construction: Buy 1 ATM call + Sell 1 ATM put (same strike & expiry).
• Net cost: near zero at the money (call cost ≈ put credit); margin needed for the short put.
• Max profit: unlimited as the underlying rises.
• Max loss: large — falls one-for-one with the underlying down to (near) zero.
• Breakeven: close to the strike, adjusted for any small net debit or credit.

How to construct it

• Pick the ATM strike closest to the current price.
• Buy the call and sell the put at that same strike and expiry.
• Set aside futures-equivalent margin for the short put leg.

Worked NIFTY example

Suppose NIFTY is near 22,500. Buy the 22,500 call for 150 and sell the 22,500 put for 145 → net cost just 5 (illustrative):

• Breakeven: 22,500 + 5 = 22,505.
• If NIFTY rises to 22,800: profit ≈ (22,800 − 22,505) = 295 per share (×75 lot = ₹22,125).
• If NIFTY falls to 22,200: loss ≈ (22,505 − 22,200) = 305 per share (×75 = ₹22,875).

When to use it

• You want a long-futures exposure but prefer the options route or better margin terms.
• You're confident in direction and don't need downside protection.

Risks to respect

• Downside is just like long futures — a fall costs you point-for-point.
• The short put can be assigned, and the position carries SPAN margin.
• No defined risk — pair it with a stop or a protective put if needed.

Related strategies

• Long Call — defined-risk bullish alternative.
• Protective Put — add downside insurance.
• Delta — a synthetic long carries delta near 1.