Synthetic short stock

Construction: read every leg

At equal premiums, terminal P/L is 100×(100−S). Maximum gain is 10,000 at stock zero; upside loss is unbounded. Different strikes would instead produce a risk reversal.

Read the ticket before the graph

BUY means you own an option right; SELL means you accept a short-option obligation. Positive quantities are long and negative quantities are short in the calculation. Check quantity, call/put, strike, multiplier and expiry before netting premium.

All legs in this example share November 20, 2026 expiration. The entry observation is October 6, 2026, with fictional QLT at 100. These are independent illustrative premiums, not a current option chain or executable quotes. The terminal diagram assumes every leg and any shares are resolved at one common settlement price.

Before expiry: time and volatility

In the matching European model, curvature and volatility sensitivities cancel. The actual legal and funding obligations remain separate. Netting theoretical Greeks is not the same as automatically netting delivery.

Manage the position deliberately

Compare the total financing, execution and assignment workflow with other bearish instruments. A short thesis still needs a risk budget and an exit plan. The expiration event matters.

From opening cash to a settlement result

Read the opening instructions: sell 1 100 call at 4.20; buy 1 100 put at 4.20. Option opening cash is $0.00 received as a credit. A received credit is not earned profit while the obligation remains open.

Set the common settlement price to 120.00. Calls have intrinsic value max(S−K,0); puts have max(K−S,0). Subtract the opening premium from each intrinsic value, then multiply by signed quantity and the 100-unit multiplier. Shares contribute their price change from their own cost. The calculation popup shows every leg.

The combined result is $-2,000.00 before costs and $-2,001.30 after illustrative opening fees of $1.30. Exit fees, slippage, funding, dividends and taxes are not included. Opening fees are 0.65 per option contract, not a statement of any broker's pricing.

Maximum terminal profit is $10,000.00; maximum terminal loss magnitude is unbounded in this model, before costs. Isolated zero-P/L settlement points in the model: 100. Move the scenario slider across each strike and explain why the slope changes there. A strike is a contract threshold, not a prediction.

This terminal model is useful for comparing risk shapes, but actual American-style assignment, share delivery, forced liquidation or a failed multi-leg exit can produce a different path. A long protective leg is not an automatic instruction that a broker must exercise it when another leg is assigned.

Open the calculation without leaving this lesson

Check your understanding

Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.