Synthetic Call

Synthetic Call
An investment strategy that mimics the payoff of a call option. A synthetic call is created by purchasing the underlying asset, selling a bond and purchasing a put option. The strike price on the put option is equal to the face value of the bond, which serves as the exercise price of the synthetic call.

A synthetic call produces the same overall payoff as a call option. The synthetic call will finish in the money when the price of the underlying asset is greater than the face value of the sold bond at the time of expiration. It will be out-of-the-money when the value of the bond is greater than that of the underlying asset. When the synthetic call is in the money, the profit is the difference between the price of the underlying asset and the face value of the bond. If the call finishes out of the money, the put option absorbs the loss from the underlying asset, with the exercise price of the put paying for the bond.


Investment dictionary. . 2012.

Игры ⚽ Поможем написать реферат

Look at other dictionaries:

  • synthetic call option — A combination of a long futures contract and a long put, called a synthetic long call. Also, a combination of a short futures contract and a short put, called a synthetic short call. Chicago Mercantile Exchange Glossary …   Financial and business terms

  • Synthetic phonics — is a method of teaching reading which first teaches the letter sounds and then builds up to blending these sounds together to achieve full pronunciation of whole words. The method relates to the English language only, and as of 2007 is the… …   Wikipedia

  • Synthetic options position — In finance, a synthetic underlying position is one that synthetically duplicates the payoff of a long underlying position with a long call and short put at the same strike and expiration. For example, a position which is long a 60 strike call and …   Wikipedia

  • synthetic — A derivative position which is created synthetically by using other derivative contracts. For example, the creation of a synthetic long future by the purchase of a call option and the sale of a put option with the same exercise price and expiry… …   Financial and business terms

  • Synthetic Forward Contract — A position in which the investor is long a call option and short a put option. The synthetic forward contract requires that both options be held simultaneously by a single investor, that have the same strike price and expiration date. This… …   Investment dictionary

  • Synthetic Put — A trading strategy that combines the short sale of a security with a long call position on the same security. Synthetic put combination is to effectively create a synthetic put position that has almost the same risk reward attributes as a… …   Investment dictionary

  • synthetic stock — An option strategy that is equivalent to the underlying stock. A long call and a short put is synthetic long stock. A long put and a short call is synthetic short stock. Bloomberg Financial Dictionary …   Financial and business terms

  • synthetic futures — A combination of a put and a call with the same strike price, in which both are bullish, called synthetic long futures. Also, a combination of a put and a call with the same strike price, in which both are bearish, called synthetic short futures …   Financial and business terms

  • synthetic put option — A combination of a short futures contract and a long call, called a synthetic long put. Also, a combination of a long futures contract and a short call, called a synthetic short put. Chicago Mercantile Exchange Glossary …   Financial and business terms

  • Synthetic Symphony — Die in Hannover ansässige SPV GmbH (Abkürzung für Schallplatten, Produktion und Vertrieb) ist eine deutsche Plattenfirma und wurde im Jahre 1984 von Manfred Schütz gegründet. SPV ist Inhaberin der Plattenlabel SPV Recordings, Snake, Steamhammer,… …   Deutsch Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”