---
description: "A bearish capital-gain strategy buying an ATM put and selling an ATM call at the same strike K = S0, replicating a short forward contract on the underlying."
tags: [options, speculation, bearish, synthetic]
---

# Short Synthetic Forward

**Section**: 2.11 | **Asset Class**: Options | **Type**: Speculation

## Overview
The short synthetic forward amounts to buying an ATM put option and selling an ATM call option with the same strike K = S0. This can be a net debit or net credit trade; typically |H| << S0. The trader's outlook is bearish: this strategy mimics a short stock or futures position and replicates a short forward contract with delivery price K and the same maturity as the options. This is a capital gain strategy.

## Construction
- Buy 1 ATM put option at strike K = S0
- Sell 1 ATM call option at strike K = S0, same expiry

Net debit or credit H (H = D for net debit trade, H = -C for net credit trade)

## Payoff Profile
f_T = (K - S_T)+ - (S_T - K)+ - H = K - S_T - H

- Breakeven: S* = K - H
- Max profit: P_max = K - H  (if stock goes to zero)
- Max loss: L_max = unlimited  (stock can rise without bound)

## Key Conditions / Signals
- Strongly bearish outlook seeking full participation in downside
- Useful when short-selling the stock directly is restricted or costly
- Typically near-zero net premium (H is small relative to S0)

## Notes
The payoff is linear in S_T — identical to short stock (minus K - H). The upside is not limited; the position loses as the stock rises above K, just like a short stock position.