Payoff Diagram

Description

A long synthetic as the name suggests replicates the investment from buying a stock.  Synthetic long's are an aggressive options strategy which replicates the stock with no initial outlay as the long call premium is offset by the premium from the short put.  Therefore only margin obligations are required to cover the short put. If the stock falls below the short put strike price, margins can increase dramatically, therefore a significant cash balance is required to undertake the strategy.

Steps Involved

Buy at the money call, sell at the money put.

Rational

A long synthetic can be used when the capital required to buy the stock directly is unavailable.  As with the stock directly, synthetics can be bought when the stock price is expected to rise.