Do You Know Your Synthetics?

Hi Shoppers,

You are one of the smart ones!

And it is going to pay off.

Here are the options synthetics which combine two of the three (stock, calls, puts) to create the third.

      • Long stock = long call + short put
      • Short stock = short call + long put 
      • Long put = long call + short stock
      • Short put = short call + long stock
      • Long call = long put + long stock
      • Short call = short put + short stock 

Memorize these easy formulas.

Hang them near your trading computer.

As long as you know these, you will know how to price options and how your position is going to move, enabling you to know your risk and manage your trades.

And that will make you a better options trader in 2023.

Trade Review

Wells Fargo (Ticker: WFC) traded over $43 on Wednesday. I sold my remaining calls for a 75% profit: in at $.60 out at $1.05.

Verizon (Ticker: VZ) closed at $40.12 on Tuesday and traded a high of $41.95 yesterday with the Jan13 40 calls closing $1.70. The chart is still looking to trade higher, possibly to $44.

Thanks for Reading … See You Next Tuesday.

Licia Leslie

Licia Leslie

Licia Leslie

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About the Author

Licia Leslie

Licia Leslie

Former CBOE floor trader and CIO at Karman Line Capital. Author of ‘The Option Traders Hedge Fund’ with over 30 years of options trading experience.

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