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Put Option Strategies for Smarter Trading: How to Protect and Build Capital in Turbulent Markets by Michael C. Thomsett

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8. Puts as Part of Synthetic Strategies: Playing Stocks Without the Risk

Anyone who hesitates to buy stock in a volatile market may want to consider setting up synthetic strategies as an alternative. A synthetic is any position that duplicates the performance of stock, without the market risk or even the requirement to purchase shares.

A synthetic position performs like the stock position it imitates. This applies to either long or short stock.

Synthetic Stock Strategies

It is entirely possible to leverage your capital to the extreme with synthetic positions. Synthetic long stock is an options position that very closely approximates movement in the stock, but for practically no cost, or in some cases even a credit. The outcome of the option ...

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