when to use a synthetic put
rather than a profit making strategy a synthetic put is a capital preserving strategy with that the cost of the call portion the option premium becomes a built in cost the option s price reduces the profitability of the method assuming the underlying stock moves in the desired direction lower thus synthetic puts are often used as insurance policies against short term spikes in stock prices in an otherwise bearish stock or as a protection against an unforeseen move upward in the stock price newer investors may benefit from knowing that their losses in the stock market are limited this safety net can give them confidence as they learn more about different investing strategies of course any protection will come at a cost which includes the price of the option commissions and other possible fees 