Long Synthetic

B/S	Strike	Type	Price
Buy 1	$45	Call	$1.29
Sell 1	$45	Put	$1.29
Net			$0

A long synthetic is buying a call and selling a put with the same strike price in the same expiration month. It is called a synthetic as the profile replicates a long position in the underlying. As a result;

The Max Loss increases as the market falls but like a long stock position is ultmately limited to the total investment of the position. In this case it is limited to the value of the position at the strike price. I.e in this example it would be -$4,500.

The Max Gain is uncapped as the market rises.

Characteristics

When to use: When you are bullish on market direction.

Long Synthetic behaves exactly the same as being long the underlying security. You can use long synthetic's when you want the same payoff characteristics as holding a stock or futures contract. It has the benefit of being much cheaper than buying stock outright.