Synthetic Long Call is combination of Swing Trading with Options Trading. Every Swing trader should be aware of this strategy as it allows them to limit the losses to great extend in case direction goes wrong or there is good negative movement in the stock.
Synthetic long call is combination of two things
- Buying the stock for positive movement
- Buying the Put to protect against potential downside risk
You can watch either the English Video or Hindi Video to understand the strategy in details.If you are new to Options trading then I would suggest you to watch or read the Getting Started tutorial on Options . That will help you understand the strategies as well. The video explains below important points about the strategy
- When to use the technique
- What is profit and loss potential of the technique
- Understanding it with example for Stock like ITC
- This technique is applied for F&O stocks only
- Helping swing traders with Option technique
English Video
Hindi Video
Conclusion
This strategy is must understand even if you do not want to trade in Options but prefer to trade in Stocks. The reason is it protects yourself from huge downside risks in case your prediction went wrong due to market conditions or any news related to stocks. It is kind of risk mitigation strategy for Swing traders.
The only limitation as mentioned in the video is that you can only trade in Stocks which are present in Futures and Options. This limits you to around 183 stocks to trade into which should in a way decent number for most traders. But F&O stocks are less volatile compared to smaller companies not present in it. So the profit potential will be limited to certain percentage.
You can refer the Stock Options section to understand probability or chance that a certain stock moves by certain percentage in a month based on last fifteen years data. This article helps you understand important concepts like volatility and beta for a F&O stock and can be used along with your swing trading setup.
Also based on the historical data you can also see the stock movement on a given month or day and predict the stock price movement to understand the historical impact of events or time frame as further checkpoint to your trading setup. All these techniques help you to minimize your loss potential as minimizing loss is the most important for any traders to be successful in market.