Synthetic Put¶
A synthetic put replicates the payoff of a long put option by combining a long call option with a short position in the underlying stock. The strategy produces limited downside risk (capped at the call premium) and profit potential as the stock price declines. Traders use it when a direct put is overpriced, illiquid, or when an existing short position needs upside protection.
HOW IT WORKS¶
The position has two legs: buy a call at a chosen strike and simultaneously short the underlying stock. At expiration, if the stock is below the strike, the call expires worthless and the short stock gains; if the stock is above the strike, the call is exercised to cover the short, capping the loss. The net payoff mirrors a long put with the same strike and expiration, and the breakeven is the initial stock price plus the call premium paid. Because the short leg requires margin and exposes the trader to borrow and dividend risk, the synthetic put is not a drop-in replacement for a long put.
IN TAPEBOARD¶
In the Tapeboard terminal, open the Options Chain for the underlying and select the target strike and expiration. Use the Strategy Builder to add a Long Call leg, then add a Short Stock leg at the current market price. Tapeboard displays the combined payoff diagram alongside an equivalent long put so you can compare net premium, margin requirements, and breakeven levels side by side. The Risk panel flags hard-to-borrow status and estimated dividend exposure for the short leg before you submit the order.