Synthetic Long Trade Setup (Sell Put + Buy Call)

A synthetic long replicates the payoff of owning 100 shares of stock, but uses options instead of buying the shares outright. It is built by combining:

• Sell 1 ATM Put (90–120 DTE)
• Buy 1 ATM Call (90–120 DTE)

Both options have the same strike and expiry. (You can choose slightly different strikes to make sure the sell put premium covers the buy call premium)

Why This Works

• Selling the put gives you premium (cash inflow).
• That premium helps fund the call purchase.
• The combined position behaves almost exactly like owning the stock: unlimited upside, downside limited to owning the stock at the strike.

Implementation Steps

1. Choose a high-conviction stock or ETF you’re comfortable owning (e.g. BRK.B, SPY).
2. Go out 90–120 days to expiry (DTE) to give the trade enough time for the thesis to play out.
3. Sell 1 ATM put at your desired entry price (the strike = the price you don’t mind owning the stock).
4. Buy 1 ATM call at the same strike and expiry.
5. Ensure you have cash reserved in case you get assigned (100 shares × strike price).

Risk & Reward

• Upside: Unlimited (just like owning shares).
• Downside: You may be assigned and must buy 100 shares at the strike.
• Margin/cash: Ensure you can afford to take delivery of the stock if assigned.

When to Use

• You want long exposure to the stock but don’t want to pay for shares upfront.
• Call premiums are expensive (high implied volatility), so financing them with a put sale makes sense.
• You’re comfortable owning the stock at the short put strike.

Things to Watch

• Assignment risk: The short put can be exercised early (rare but possible).
• Paper P&L swings: The trade behaves like stock, so expect large moves.
• Focus on the endgame: Either keep the long call payoff or get assigned and hold shares.

💡 Tip: If assigned shares, you can turn it into a covered call strategy (sell OTM calls against your new shares) to keep generating income.