Synthetic Long Stock Position Construction
Which of the following option combinations creates a 'synthetic long stock' position that mirrors the profit and loss behavior of owning the underlying shares?
A synthetic long stock position is created by buying a call and selling a put with identical strikes and expirations. If stock rises, the long call gains dollar-for-dollar; if it drops, the short put loses dollar-for-dollar.
Complete Analysis & Legal Rationale
Buying a call grants unlimited upside participation. Selling a put creates downside risk identical to owning shares. Combined at the same strike, this replicates stock ownership with zero net delta drift.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Long call (unlimited upside) + Short put (downside risk to zero) exactly mimics 100 shares long stock.
Buying both is a long straddle (volatility play), not synthetic stock.
Sell Call + Buy Put creates a synthetic SHORT stock position.
Selling both creates a short straddle (neutral volatility strategy).
Official Standard: Aggregates synthetic positions for position and exercise limit monitoring.