Synthetic Long Call Explained

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Understanding Synthetic Positions

The basic definition of synthetic positions is that they are trading positions created to emulate the characteristics of another position. More specifically, they are created in order to recreate the same risk and reward profile as an equivalent position. In options trading, they are created primarily in two ways.

You can use a combination of different options contracts to emulate a long position or a short position on stock, or you can use a combination of option contracts and stocks to emulate a basic options trading strategy. In total, there are six main synthetic positions that can be created, and traders use these for a variety of reasons.

The concept may sound a little confusing and you may even be wondering why you would need or want to go through the trouble of creating a position that is basically the same as another one. The reality is that synthetic positions are by no means essential in options trading, and there’s no reason why you have to use them.

However, there are certain benefits to be gained, and you may find them useful at some point. On this page, we explain some of the reasons why traders do use those positions, and we also provide details on the six main types.

  • Why use Synthetic Positions?
  • Synthetic Long Stock
  • Synthetic Short Stock
  • Synthetic Long Call
  • Synthetic Short Call
  • Synthetic Long Put
  • Synthetic Short Put

Why Use Synthetic Positions?

There are a number of reasons why options traders use synthetic positions, and these primarily revolve around the flexibility that they offer and the cost saving implications of using them. Although some of the reasons are unique to specific types, there are essentially three main advantages and these advantages are closely linked. First, is the fact that synthetic positions can easily be used to change one position into another when your expectations change without the need to close out the existing ones.

For example, let’s imagine you have written calls in the expectation that the underlying stock would drop in price over the coming weeks, but then an unexpected change in market conditions leads you to believe that the stock would actually increase in price. If you wanted to benefit from that increase in the same way you were planning to benefit from the fall, then you would need to close your short position, possibly at a loss, and then write puts.

However, you could recreate the short put options position by simply buying a proportionate amount of the underlying stock. You have actually created a synthetic short put as being short on calls and long on the actual stock is effectively the same as being short on puts. The advantage of the synthetic position here is that you only had to place one order to buy the underlying stock rather than two orders to close your short call position and secondly to open your short put position.

The second advantage, very similar to the first, is that when you already hold a synthetic position, it’s then potentially much easier to benefit from a shift in your expectations. We will again use an example of a synthetic short put.

You would use a traditional short put (i.e. you would write puts) if you were expecting a stock to rise only a small amount in value. The most you stand to gain is the amount you have received for writing the contracts, soit doesn’t matter how much the stock goes up; as long it goes up enough that the contracts you wrote expire worthless.

Now, if you were holding a short put position and expecting a small rise in the underlying stock, but your outlook changed and you now believed that the stock was going to rise quite significantly, you would have to enter a whole new position to maximize any profits from the significant rise.

This would typically involve buying back the puts you wrote (you may not have to do this first, but if the margin required when you wrote them tied up a lot of your capital you might need to) and then either buying calls on the underlying stock or buying the stock itself. However, if you were holding a synthetic short put position in the first place (i.e. you were short on calls and long on the stock), then you can simply close the short call position and then just hold on to the stock to benefit from the expected significant rise.

The third main advantage is basically as a result of the two advantages already mentioned above. As you will note, the flexibility of synthetic positions usually means that you have to make less transactions. Transforming an existing position into a synthetic one because your expectations have changed typically involves fewer transactions than exiting that existing position and then entering another.

Equally, if you hold a synthetic position and want to try and benefit from a change in market conditions, you would generally be able to adjust it without making a complete change to the positions you hold. Becaus of this, synthetic positions can help you save money. Fewer transactions means less in the way of commissions and less money lost to the bid ask spread.

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Synthetic Long Stock

A synthetic long stock position is where you emulate the potential outcomes of actually owning stock using options. To create one, you would buy at the money calls based on the relevant stock and then write at the money puts based on the same stock.

The price that you pay for the calls would be recouped by the money you receive for writing puts, meaning that if the stock failed to move in price you would neither lose nor gain: the same as owning stock. If the stock increased in price, then you would profit from your calls, but if it decreased in price, then you would lose from the puts you wrote. The potential profits and the potential losses are essentially the same as with actually owning the stock.

The biggest benefit here is the leverage involved; the initial capital requirements for creating the synthetic position are less than for buying the corresponding stock.

Synthetic Short Stock

The synthetic short stock position is the equivalent of short selling stock, but using only options instead. Creating the position requires the writing of at the money calls on the relevant stock and then buying at the money puts on the same stock.

Again, the net outcome here is neutral if the stock doesn’t move in price. The capital outlay for buying the puts is recouped through writing the calls. If the stock fell in price, then you would gain through the purchased puts, but if it increased in price, then you would lose from the written calls. The potential profits and the potential losses are roughly equal to what they would be if you were short selling the stock.

There are two main advantages here. The primary advantage is again leverage, while the second advantage is related to dividends. If you have short sold stock and that stock returns a dividend to shareholders, then you are liable to pay that dividend. With a synthetic short stock position you don’t have the same obligation.

Synthetic Long Call

A synthetic long call is created by buying put options and buying the relevant underlying stock. This combination of owning stocks and put options based on that stock is effectively the equivalent of owning call options. A synthetic long call would typically be used if you owned put options and were expecting the underlying stock to fall in price, but your expectations changed and you felt the stock would increase in price instead. Rather than selling your put options and then buying call options, you would simply recreate the payoff characteristics by buying the underlying stock and creating the synthetic long call position. This would mean lower transaction costs.

Synthetic Short Call

A synthetic short call involves writing puts and short selling the relevant underlying stock. The combination of these two positions effectively recreates the characteristics of a short call options position. It would usually be used if you were short on puts when expecting the underlying stock to rise in price and then had reason to believe the stock would actually fall in price.

Instead of closing your short put options position and then shorting calls, you could recreate being short on calls by short selling the underlying stock. Again, this means lower transaction costs.

Synthetic Long Put

A synthetic long put is also typically used when you were expecting the underlying security to rise, and then your expectations change and you anticipate a fall. If you had bought call options on stock that you were expecting to rise, you could simply short sell that stock. The combination of being long on calls and short on stocks is roughly the same as holding puts on the stock – i.e. being long on puts.

When you already own calls, creating a long put position would involve selling those calls and buying puts. By holding on to the calls and shorting the stock instead, you are making fewer transactions and therefore saving costs.

Synthetic Short Put

A normal short put position is usually used when you are expecting the price of an underlying stock increase by moderate amount. The synthetic short put position would generally be used when you had previously been expecting the opposite to happen (i.e. a moderate drop in price).

If you were holding a short call position and wanted to switch to a short put position, you would have to close your existing position and then write new puts. However, you could create a synthetic short put instead and simply buy the underlying stock. A combination of owning stock and having a short call position on that stock essentially has the same potential for profit and loss as being short on puts.

Explaining Call Options (Short and Long)

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What is a Call Option?

A call option is the right to buy the underlying futures contract at a certain price.

Buying Calls

When traders buy a futures contract they profit when the market moves higher. The call option has a similar profit potential to a long futures contract. When prices move upward the call owner can exercise the option to buy the future at the original strike price. This is why the call will have the same profit potential as the underlying futures contract.

However, when prices move down you are not obligated to buy the future at the strike price, which is now higher than the futures price because that would create an immediate loss.

With this downside protection why would any trader buy a futures contract instead of call?

The potential to profit on a call option does not come without a cost. The seller or “writer” of the option will require compensation for the economic benefit given to the option owner. This payment is similar to an insurance policy premium and, is called the option premium. The buyer of a call option pays a premium to the seller of a call option.

As a result of the added cost of the premium, the profit potential for a call is less than the profit potential of a futures contract by the amount of premium paid. The price of the future must rise enough to cover the original premium for the trade to be profitable. Moreover, options premiums are impacted by time decay and changes in volatility (futures are not).

The breakeven point for a call is the strike price plus the premium paid. So if you paid 4.50 points for a 100 call option, the breakeven is 104.50. The most you could lose is the premium or 4.50 points.

Selling Calls

For every long call option buyer, there is a corresponding call option “writer” or seller. If you sell the call option, then you receive the premium in return for the accepting the risk, that you may need to deliver a futures contract, at a price lower than the current market price for that future.

Option sellers have unlimited risk if the futures price continues to rise.

Call sellers will profit as long as the futures price does not increase beyond the value of the premium received from the buyer.

The breakeven point is exactly the same for the call seller as it is for the call buyer.

Summary

Call Buyers have protection in that their risk is limited to the premium they must pay for the call option. The maximum risk of a call option is the premium paid. They can lock in the strike price and profit (should the underlying rise far enough) while risking only the upfront premium paid.

How Long Does Synthetic Urine Last or Go Bad?

If you have a urine screening coming up, you might be wondering about the Quick Fix Synthetic Urine you bought some time ago.

Is it still good? How long does it last? Well, set your fears aside – QuickFix has the longest-lasting shelf life in the industry.

Does Fake Urine go bad? What can affect my product?

Storing your fake urine incorrectly can cause it to go bad way before its actual expiration date. There are 3 main factors which could negatively affect your product:

2- Exposure to oxygen

3- Extreme conditions.

1. Sunlight

Sometimes when people move stuff around, they forget to store things at appropriate temperatures.

Having the fake pee in contact with direct sunlight will negatively affect the pH levels in the urine; which can, in turn, affect your urinalysis results.

If you accidentally leave it out exposed to sunlight for a short amount of time—a couple of minutes or an hour—it will not affect it; however, leave it out there for more extended period of time, you might want to talk to someone at Quick Fix about what next steps you should take.

2. Exposure to Oxygen

Another factor to consider is its exposure to oxygen. On many different boards and websites, people ask the question as to whether they can use fake urine if they have already opened it.

Say, for instance, you took it to work thinking that your urine screening was going to be that day, opened it to check the pH or creatinine levels and then you found out that your testing won’t be for another few days or weeks. What about the product that you already opened? Will it be okay for your next urine screening?

The answer is yes. However, the quality of artificial urine (regardless of which brand it is) can deteriorate the pH levels substantially if left open and exposed to oxygen and particles in the air. So if you are using fake urine, please remember to seal it properly whenever you are not using it.

3. Extreme conditions and temperatures.

The best option would be to store your QuickFix product at room temperature, with no direct access to sunlight. So as long as you are keeping your artificial urine in a room where the temperature is between 68 degrees and 75 degrees, you will be in good shape.

Can you refrigerate urine?

We do not recommend that you refrigerate it and do not put it in the freezer.

Does Synthetic Urine expire?

The answer is yes – like any other product, fake urine has an expiration date. This varies depending on the product or the manufacturer, but QuickFix boasts of the longest lasting shelf life.

This means that our urine can be heated and cooled without affecting its ingredients within a two year period.

After this period of time, your artificial urine will expire – its quality, pH and creatinine levels will deteriorate, and it will be easier for a lab technician to spot that the sample is fake.

If your QuickFix product is expired or goes bad, you should NOT use it for screening, as it will compromise the results.

Since QuickFix can last two years, it’s important to verify that you are still within the time frame. So for your protection, and for a successful result, we tell you the manufacturing date of your product.

You’ll find this information on a green insert in the package. You won’t see an actual date, however. What you’ll notice is the batch number with a code.

Verify with the Lab

The batch number of your particular product is on the left side of the directions on a green piece of paper or as of recent printed on the actual urine sample bottle. Don’t throw this insert away, since it contains your step by step instructions.

You can verify your batch number and get the exact date of manufacture by calling the phone number for Spectrum Labs, and they will give you the expiration date. We do recommend you verify each batch before you use it.

Tips to Make Your Fake Urine Last Longer

Here’s a summary of our top tips to keep your fake pee fresh and preserve its shelf life:

  • Store it in a cool, dry place
  • Keep it out of direct sunlight
  • Don’t refrigerate it or put in a freezer
  • Don’t expose it to oxygen
  • Always check your batch number
  • Stay away from counterfeit products

FAQ’s

Does urine get cloudy when refrigerated?

Yes keeping a real human urine sample in the refrigerator can turn it cloudy but it won’t have any effect on the sample and is likely to pass a test. If you are using someone else’s piss to pass a urine test and it is cloudy it could be because of bacteria.

The best option if you are going to store genuine urine for any length of time is to keep it frozen, this will lessen bacteria growth. Bacteria will start to grow after 24 hours even if the sample is refrigerated while keeping it in the freezer it should remain growth free indefinitely.

The safest bet is to use fake urine, as it won’t go bad and will last a much longer time and its certainly more hygienic! It’s also said that lab technicians who regularly carry out these urine tests have a nose for stale pee. If you want a better chance of passing then use a laboratory designed option such as QuickFix.

Can you still use expired QuickFix urine?

No, you shouldn’t use expired QuickFix products, as it is likely that the quality of the product’s ingredients could have deteriorated making it easy for a laboratory technician to realize the sample isn’t genuine. Having the wrong pH balance and creatinine levels will raise a red flag and the probable scenario is you will fail or be tested under supervision the second time.

QuickFix has a shelf life of two years which is longer than other fake pee brands. As we discussed earlier you can find the batch number on the bottle to ascertain if it is genuine and within its expiry date.

Can I store fake pee in an opened bottle?

It’s advised to keep save artificial pee in an airtight container. Subjecting it to oxygen can accelerate its deterioration, and reduce its life span. Fake pee is usually packaged in airtight pouches to avoid this issue and prevents oxygenation.

Can you reuse Fake urine?

Yes, you can reuse and reheat it multiple times this will not be an issue with QuickFix. Just make sure you have some extra heat pads on hand if you need to reheat it.

Can you dilute fake urine with water or mix it with real urine?

No this would be a bad idea, both of these would affect the chemical composition of the fake urine. Products such as QuickFix are a complete product and contain the same urine ingredients as is found in your body. Adding random elements to the liquid will result in you failing the test. You just need to take care to follow the instructions and make sure when submitting your sample it is warm enough and at the correct temp.

Conclusion

Now that we have discussed how long you can store urine be it fake or real pee, what to watch out for concerning expiry dates and how to check batch numbers it is time to decide on the best choice for your particular circumstances.

You might have a friend you can trust to provide you with what you hope to be a clean sample, and then you have got to hope that bacteria haven’t grown during the time you have stored it. Or you can use a lab-tested formula that is a lot more durable and long-lasting as well as proven.

There’s enough trouble in life as it is without the additional stressors of wondering if you are going to pass that pre-employment screening. It’s time to set all that worry aside and let our QuickFix synthetic urine come to the rescue.

How can you go wrong? We have a 99.9% pass rate, a money-back guarantee, and an easy to use product. Check out our products and accessories and make that call today.

Resources

About Chris Wilder

Chris Wilder spent many years working as a part-time phlebotomist, [and yes he knows all the vampire jokes] while honing his writing skills. In 2020 he gave up playing around with blood to become a full-time writer. While dealing with blood might seem a cold and analytical vocation, his role of phlebotomist required dealing with nervous patients who needed plenty of empathy and compassion, Chris has carried this over to his written work. He believes that Quick Fix Synthetic products are the best chance of success. With his wide knowledge in this field and his understanding of how urine drug tests can affect the lives of everyday people like you and me, Chris can explain in layman’s turns all the important information you need to know. In his free time, he likes to hang out with friends and check out local bands drinking a glass or two of his favorite Makers Mark Bourbon, while enjoying a recreational smoke. To keep himself in shape he takes extremely short walks with Lola, his incredibly lazy pet pug.

Why is buying a stock and buying a put option the same as buying a call option?

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I will try to answer your question without getting into the technical aspects.

You own a stock. You benefit from it if the price rises after you buy, you sell it at a higher price and book profit. But the markets do not work according to your wishes, and there is every chance that the stock price drops and you are making a loss. How do you avoid this?

Enter Put option.

A put option gives you a right, but not the obligation, to sell the stock at a particular price. So If you have bought the stock for $50 and you want to avoid making a loss, you buy a Put with a strike price of $50, which .

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