Fiduciary Put

A fiduciary put is an advanced synthetic options strategy that creates put option exposure through the combination of short stock positions and call option purchases, demonstrating sophisticated understanding of put-call parity relationships while providing alternative execution methods for bearish strategies. This complex approach involves simultaneously shorting the underlying stock and buying a call option at the same strike price, creating a position that replicates the exact payoff profile of a long put option while maintaining different margin and operational characteristics. The strategy is particularly valuable when put options are overpriced relative to the synthetic equivalent, when traders want to maintain short exposure with defined risk parameters, or when specific borrowing or margin considerations favor synthetic construction over direct put purchases. Professional traders and hedge funds use fiduciary puts for portfolio hedging, arbitrage opportunities, and when market inefficiencies create pricing advantages for synthetic positions over direct option purchases. The strategy requires sophisticated understanding of short selling mechanics, borrowing costs, dividend obligations, and early assignment risks while providing identical economic exposure to traditional put options. Risk management involves monitoring stock borrowing availability, dividend payment dates, and the relationship between synthetic and actual option prices to optimize position management and profit realization

If NIFTY is at ₹25,800, set up: Short NIFTY at ₹25,800, Buy ₹25,800 Call for ₹120, receiving ₹25,680 net proceeds with payoff identical to ₹25,800 Put option, providing significant downside profit potential below ₹25,680 and maximum loss limited to ₹120 above ₹25,800.