Synthetics:
When I first started trading options I used to have a little card written with this on it. Basically it is Two or more trading vehicles packaged together to emulate another
pricing vehicle or spread. Because the package involves different components,
price is also different, but the risk is the same. So, for example, owning the underlying and shorting the call IS THE SAME AS being short the put (of the same strike as the call) and so on….
Long Underlying + Short Call = Short Put
Short Underlying+ Long Call = Long Put
Long Underlying + Long Put = Long Call
Short Underlying + Short Put = Short Call
Long Call + Short Put = Long Underlying
Short Call+ Long Put = Short Underlying
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