Short Synthetic is basically selling call option and buying a Put option of an same index / underlying stock with same strike price, same expiration.
Short Synthetic option if your view on the Market to fall / Bearish in the near term.
Strategy - Bearish (it same as Shorting the underlying asset)
Risk - unlimited
Reward - unlimited
Breakeven is Strike price +/- net premium paid/ received
If the Market is Bullish, you will be in loss.
Eg.
NIFTY Currently trading at 15700.
You are shorting NIFTY 16000 CE June 2022 @ 200 premium of 1 lot size (50 contracts) and Buying NIFTY 16000 PE June 2022 @ 400 premium of 1 lot size in view of your Bearish view.
So, net premium is (-)200*50= 10000 is the premium paid to the buyer.
If the Market is Bullish and ends up @16500 on expiry, you will be in huge loss because you are against the Trend of your strategy.
If the Market is Bearish, and ends up at 15300 on expiry date, your profit is unlimited
For 1 point increase in Nifty, delta will decrease. As the contract is near to expire, theta decay helps in your favour (option seller)
