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To: Robert Graham who wrote (21001)5/7/1999 2:49:00 PM
From: Judy  Respond to of 42787
 
7-8x leverage if one is correct, and double whammy if one is wrong. The prems from the short put is applied to the purchase of the long call.

Technically a synthetic long is comprised of short put/long call at the same strike, same expiry and the risk equivalency curve is the same as holding the equity. Refer to Lawrence McMillan's options book for additional info.