Synthetic Long

The payoff is identical, but there are differences: No dividends, no voting rights, position has expiration (must roll), and requires margin for short put. For trading purposes, it's functionally equivalent; for investing, actual stock has advantages.

Capital efficiency (near-zero cost vs full stock price), no stamp duty (0.2% savings), flexibility (easy to close/adjust), and leverage. Use synthetic for trading; use stock for long-term investing where dividends matter.

You buy stock at the strike price. Not necessarily bad - you wanted bullish exposure anyway. After assignment, you own stock + long call (like a covered call situation). You can continue holding or close the position.

Roll at 30-45 DTE remaining. For a 90 DTE entry, you'd roll around day 45-60. This means roughly every 2-3 months for ongoing positions.

Yes - the same risk as owning stock. If stock falls significantly, you have significant losses. Unlike a long call where loss is limited to premium, synthetic long can lose substantial amounts if stock declines toward zero.

Effective entry = Strike ± Net Premium. If you paid net S$0.05 debit for S$33 strike, your effective entry is S$33.05. If you received net S$0.10 credit, effective entry is S$32.90. This is your breakeven.

Due to interest rates (carry cost) and dividends. Higher interest rates → calls more expensive → net debit. High expected dividend → puts more expensive → may get net credit. Also, supply/demand and bid-ask can affect pricing.

Yes - add a long OTM put for downside protection. This creates a synthetic long with a floor. Cost is the put premium. Alternatively, use ZEBRA structure from the start if you want defined risk with stock-like delta.

Before ex-dividend, you might enter synthetic for credit (puts expensive). On ex-dividend, stock drops but you don't get dividend. Your synthetic value drops correspondingly. You're indifferent to the dividend itself since you don't receive it.

Almost always sell rather than exercise. Selling captures remaining time value; exercising only gets intrinsic. Exception: If time value is negligible and you want actual stock (for dividends or to simplify position).

If synthetic is cheap (call too cheap or put too expensive), buy synthetic + short stock = risk-free profit (conversion). If synthetic is expensive, short synthetic + buy stock = risk-free profit (reversal). These opportunities are rare and fleeting.

Implied borrow rate = (Call - Put + Dividend PV) / (Stock × Time). Comparing to risk-free rate shows if synthetic is fairly priced. Deviation indicates hard-to-borrow situations or trading opportunities.

When very bullish and want extra upside leverage. 2 calls + 1 short put = delta > 100. Profits accelerate above strike. Risk: Still have full downside (one put worth of risk) plus the extra call cost. Use for high-conviction moves.

They offset with opposite positions - either other options or stock itself. They trade the spread between bid and ask, staying delta neutral. They continuously adjust as prices move, profiting from flow and mispricing.

Synthetic forward price ≈ Stock × e^(r×t) - Dividends PV. Futures price should equal this. If they diverge, arbitrage exists between synthetic and futures. In practice, they're tightly linked in liquid markets.