What if you could control a full stock position… without paying anywhere close to full price?
Most investors assume their only choices are to buy the shares outright, or sit on the sidelines and wait for a better price. But options allow for a third path — one that mirrors the risk and reward profile of a long stock position, but requires only a fraction of the capital outlay.
This strategy is called a synthetic long stock position, and in his latest video, Rick Orford breaks down exactly how professional traders use it to replicate ownership of high-priced stocks without tying up thousands of dollars.
If you’ve ever wanted to participate in a fast-moving stock but didn’t want to commit the cash, this is one strategy worth understanding.
What is a Synthetic Long Stock?
A synthetic long stock mimics the profit and loss profile of actually owning 100 shares, but uses options instead of stock.
To initiate the position, on the same underlying asset:
Both options should carry the same strike price and the same expiration date.
When these two options are combined, the position behaves almost exactly like owning the stock:
- Unlimited upside potential
- Nearly identical downside risk
- Directional exposure tied to the strike price
In other words, you get the economic benefits of stock ownership... at a drastically reduced upfront cost.
How a Synthetic Long Stock Works
1. Your long call is your upside engine
If the stock rises above your call strike, the call goes in the money and starts generating profits just like owning shares.
2. Your short put subsidizes the position
Selling the put:
- Offsets some or all of the call’s cost
- Reduces the net debit
- Anchors you to your strike price
But it also creates assignment risk. If the stock falls below the put strike near expiration, you may be required to buy 100 shares at that price.
The Risks You MUST Understand
Synthetic positions aren’t a beginner-friendly trade, and that’s due to the risk involved. Traders need to watch out for:
- Assignment risk if the short put goes in the money
- Margin requirements for the short put
- Increased option complexity
- Liquidity considerations
This is why many traders prefer to close the short put early if momentum stalls.
How to Analyze Synthetic Trades on Barchart
Traders can use multiple Barchart tools to evaluate potential synthetic setups:
- Options Chain: Compare call and put premiums side by side.
- Profit & Loss Charts: Visualize synthetic payoff curves.
- Implied Volatility: Identify when options are overpriced or underpriced.
- Expected Move Charts: Gauge probable price ranges.
- Options Screener: Filter for favorable strikes or expirations.
To understand how this works in practice — with real tickers and live examples — you can:
Watch this quick clip from Rick Orford:
- Stream the full YouTube video covering synthetic positions, risk, returns, and real-world trade setups
- Explore Barchart’s Options Screener and Profit/Loss charts to build your own synthetic setups
