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Politics : Formerly About Advanced Micro Devices
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To: RDM who wrote (77780)10/30/1999 1:56:00 AM
From: Bilow  Read Replies (1) of 1577194
 
Hi RDM; Re: "I wrote Nov 20 Puts and then following with Nov 20 Calls financed by the puts."

So you are short the Nov 20 put, and are long the Nov 20 call? In the industry, that is what is known as a "synthetic long" position, if the number of contracts are equal. If the number of contracts is unequal, it would be a synthetic long plus either some short puts or long calls.

Wouldn't make much sense for someone to do this other than an options floor trader, (due to the commissions, spreads, and margin requirements involved being so much greater than for an actual long position), so I am sure I misunderstood your meaning. Please correct my understanding.

-- Carl

P.S. The opposite position, known as a "synthetic short" is used by traders, who are unable to borrow stock, as a way of shorting a stock, and is a lot more common.
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