Series 3: 5.1.2. Synthetic Short Calls And Synthetic Short Puts

5.1.2. Synthetic Short Calls and Synthetic Short Puts

One can create short synthetic puts and calls as well, such as the synthetic short call diagrammed below. A short synthetic requires a short stock or futures contract position coupled with either a short put or a long call.

You might create a synthetic short call if you have shorted puts while expecting a price rise in the underlying product but then become concerned that the price will fall.