Synthetic Short

Market Terms

We don't know everything about the markets.  We're just devoted to learners.  Taken from those smarter than ourselves, here's how we define Synthetic Short.

An strategy for options trading designed to imitate a short stock position.  A synthetic short is created by selling at-the-money calls and buying an equal number of at-the-money outs of the same underlying stock with the same expiration date.  A synthetic short position has the potential for unlimited profit (also meaning that it has the potential for unlimited loss).  Similar to a short stock position, heavy losses can occur for the synthetic shorted stock if the underlying stock price unexpectedly rises.