Synthetic Put Strategy: Definition, Benefits, and How It Works
5paisa Research Team
Last Updated: 04 Apr, 2025 01:03 PM IST

Content
- When to Use a Synthetic Put?
- Things to Consider Before Using a Synthetic Put Strategy
- Benefits of Using a Synthetic Put Strategy
- Drawbacks of Synthetic Call Strategy
- Why To Create a Synthetic Put Options
- Conclusion
A Synthetic Put option strategy can be developed by combining stock or futures with options, just like a Synthetic Call option strategy. Hedging against future stock price increases is the aim.
This strategy is referred to as a "synthetic" put since the reward structure is similar to that of a long put. Other names for it include a protective call and a married call. Continue reading to find out more about the synthetic put approach.
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Frequently Asked Questions
By opening two positions, you can create a synthetic put strategy. You purchase a long call option on the same stock after first taking a short position in it. When combined, these trades mimic the long put option's payout.
In order to guard against losses when market expectations shift, traders employ a synthetic put technique. They buy a call option, which lowers the cash required to change their trade while offering downside protection, rather than buying a stock to amend a short position.
It enables flexibility in modifying trades without requiring further stock transactions, lowers trading expenses, and protects against downside.