An investor can duplicate the payoffs generated by taking a long position in a stock by

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This strategy is called a synthetic long position and involves buying a call option on the stock while simultaneously selling a put option on the same stock, with the same expiration date and strike price equal to the present value of the stock. The investor then invests the present value of the strike price in Treasury securities. This will replicate the same payoffs as taking a long position in the stock, as the investor will profit if the stock price increases, and lose only the premium paid for the options if the stock price decreases. Options trading and Treasury investing, however, involve additional risks and costs that must be taken into consideration.

An Investor Can Duplicate the Payoffs Generated by Taking a Long