Synthetic Long Call
...or Buy Stock/Buy Put
Position
Type
Strike
Expiration
Quantity
Long
Put
ATM (0)
Long term
1
Long
Stock
    
 100
         
         
Example:
Long 1 Oct 60 Put @ 4 1/4
Long 100 Shares XYZ @ $60
Opinion: Bullish to very bullish
  
   
Description:
The purchase of a Put, while owning shares in XYZ, is a strategy with a limited loss and (after subtracting the Put premium) unlimited profit.
Synthetic: As long as the Put is owned, the strategy's risk/reward profile is equivalent to long Call

When to use:  
When stock ownership is desired yet investor is concerned about near-term downside risk.

Profit & Loss Characteristics:  
Profit potential is unlimited. Losses limited as long as the Put option is owned.

Break-even Point:  
Purchase price of XYZ stock + premium paid for Put.

Time Decay:  
Negative. Over time, the time value portion of the Put erodes (i.e., decays). At expiration, the Put’s value will equal its intrinsic value.

Volatility:  
Changes in the Put option’s implied volatility has an effect on the “time value” portion of the option’s premium.

If volatility increases, options increase in price. If volatility decreases, options decrease in price.

Thus, a change in the Put option’s implied volatility has the same effect as changing the number of days remaining until the option’s expiration: an increase in volatility is like adding more days to the life of an option.