A synthetic option that is based on a short position in the underlying asset and a long position in a call option on the same asset. In other words, establishing a synthetic put involves spreading a short stock position (stock not owned) with the purchase of an at-the-money call. A loss to the short underlying position due to a rise in the underlying asset will be offset by the increase in the value of the call option. Usually, the credit received for selling the stock short exceeds the premium paid to purchase the option, a synthetic put position brings about a net credit in the trading account. Time decay has an inverse impact on the time value of the option, the investor will need to close out the option position at least one month prior to expiration.

Generally, synthetic puts can be classified as synthetic long puts and synthetic short puts.