Synthetic long stick combines a long call and a short stock at the same strike. The market risk is identical to that of owning shares of stock (if the stock price declines, the put rises in value, could be exercised, and result in 100 shares put to you above market value). This "loss" is the same as a loss from just owning stock. But two important considerations: Unlike owning stock, you can avoid exercise of the short put; and also unlike owning 100 shares of stock, the synthetic short stock position requires no specific investment risk but does come with margin collateral requirements.
It combines a long call and s short put at the same strike, and you should be able to open these for close to zero cost (or even a small credit). The risk is that if the stock price falls, you could end up having 100 shares put to you at the strike. So if the stock price falls, you would be out the difference between strike and market value. But unlike a loss on 100 shares of long stock, you can avoid exercise by (a) closing the put once time value declines; (b) covering the short put with a different long put; or (c) rolling forward to a later-expiring short put.
You could replace the original put by committing to one extra month, perhaps even at a lower strike. The added time value adds to profitability. Or if you are willing to tie yourself into several more months, you can earn even more premium, again perhaps also reducing strike exposure by picking a lower future strike.
The combined option positions duplicates price movement in the underlying, which explains why it is named a "synthetic" position. For every point the stock prices, the call mirrors that price movement in intrinsic value. Meanwhile, the put declines and will end up expiring worthless. Of course, if the price declines, the synthetic position works against yo0u, which is why closing or rolling is a good defensive move.
The actual outcomes are going to0 vary based on the volatility level of the stock. When it comes to options positions, volatility is the big deciding factor. However, the same rationale is easily applied to stocks at any volatility level and any price, even prices below $50 per share. Option premium won't be as rich, but the long/short offset still enables you to benefit from price movement for little or no outlay of cash. The volatility of the underlying and of the option affects premium value, but also defines differences in levels of risk, so the underlying you pick should be a good match for your risk tolerance. Volatility is the most important feature of options, and you can time your entry and exit based on the rapid changes in volatility levels.
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