Synthetic Short Sale

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An option strategy in which one buys a put while selling a call on the same underlying asset. This is called a synthetic short sale because the investor makes a profit if the price of the underlying asset falls and a theoretically unlimited loss if the price rises.

synthetic short sale

The purchase of a put and the simultaneous sale of a call on the same security. This combination produces the same results as a short sale of the underlying stock; that is, unlimited potential gains for a downward price movement of the stock and unlimited potential losses for an upward movement of the stock.

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