Creates a position that behaves identically to owning 100 shares of stock using options only. Buying a call and selling a put at the same strike mirrors the risk/reward of stock ownership with less capital.
Unlimited
Substantial (to strike price × 100)
Strike Price + Net premium paid/received
Long 1 ATM Call + Short 1 ATM Put (same strike, same expiry)
Unlimited profit potential. Substantial risk. Identical P&L profile to owning 100 shares.
When you want stock-like exposure using options. When you want to use less capital than buying shares. When you want the same risk profile as stock ownership.