Synthetic Long

A call alone has delta 0.50-0.80, not 1.00. You'd need nearly 2 calls to match stock movement, and you'd pay significant time decay (theta). Synthetic long has delta exactly 1.00 and near-zero theta - it's a purer stock replacement. Plus, calls require paying full premium upfront while synthetic can be near-zero cost.

If stock > strike: Your call is ITM (worth intrinsic value), your put expires worthless. You'll either exercise the call (buy shares at strike) or sell the call. Net result: You capture the gain just like owning stock. No special action needed - the profit is realized.

As bad as owning stock. If stock goes from A$50 to A$25, you lose A$25 per share (A$2,500 per synthetic contract). The short put obligates you to buy at A$50 even though stock is at A$25. This is identical to owning shares and watching them crash. Treat position sizing accordingly.

Typically Level 3-4 approval is required because you're selling a naked put (or put covered only by the call, not shares). The short put creates the same risk as buying stock on margin. Check with your broker for specific requirements.

No - options have expirations. You must roll to new expiration (typically every 1-6 months) to maintain the position. This creates small friction costs. For truly indefinite holdings, buying stock may be simpler. Synthetic works best for medium-term (weeks to months) bullish positions.

Close current synthetic (sell call, buy put) and open new synthetic at later expiration (buy call, sell put). Do this when 21-30 DTE remaining. Net cost is usually small. Can roll to new strike if stock has moved. Rolling maintains your stock-equivalent position without interruption.

You're obligated to buy 100 shares at the strike price. This converts your synthetic to real stock ownership. It's not necessarily bad - you now own shares you were synthetically exposed to. Your call remains (unless you close it). Decide: Keep shares (and maybe sell calls against them) or sell shares (realizing loss) and close call.

The put becomes more valuable (and call less valuable) by approximately the dividend amount before ex-date. If your put is ITM near ex-date, assignment is more likely (the holder wants the dividend). Options prices already reflect expected dividends through put-call parity - you don't 'avoid' dividend loss with synthetic.

ATM is standard and most liquid. ITM call (lower strike) costs more upfront but has intrinsic value buffer. OTM call (higher strike) receives credit but put is deeper ITM. All maintain delta ≈ 1.00. Most traders use ATM for simplicity and best execution.

Size it exactly like you'd size a stock position - they have identical risk. If you'd buy A$20,000 of stock (400 shares at A$50), use 4 synthetic contracts. The difference is capital deployed: Stock needs A$20,000; Synthetic needs ~A$5,000 margin + A$80 premium. Same risk exposure, different capital requirement.

Calculate theoretical synthetic cost: Net premium should ≈ (Stock - Strike) × e^(rT) - PV(Dividends). If actual net premium deviates significantly, parity is violated. If synthetic is cheap (negative premium), buy it. If expensive (large positive premium), wait or consider reversal. Large violations indicate market stress or illiquidity.

Put skew elevates OTM put IV above ATM. At ATM synthetic: You sell put at slightly higher IV, buy call at slightly lower IV. This makes synthetic marginally more expensive than pure parity. When skew is steep, this effect is larger. Time entry to flat skew if seeking optimal pricing.

Index synthetic (XJO) for: Market-level exposure, tactical allocation, high liquidity, lower dividend loss impact. Stock synthetic for: Stock-specific thesis, potential assignment to ownership, corporate action plays. Index synthetic is more 'pure' exposure; stock synthetic can convert to actual ownership.

Takeovers: Options adjusted for cash/stock consideration. Spin-offs: Options may cover basket of entities. Special dividends: Strikes adjusted down by dividend amount. Check ASX/OCC bulletins for specific adjustments. Complex actions may make synthetic behavior diverge from stock temporarily. Consider closing before complicated events.

Simulate 10,000+ stock price paths. For each path, calculate terminal value under both strategies (including dividends, margin costs, alternative returns). Compare distributions: Mean (expected return), Standard deviation (risk), VaR/CVaR (tail risk). Synthetic may have higher mean (capital efficiency) but similar risk. Risk-adjusted comparison (Sharpe ratio) is most informative.