MM27 - What Happens to Your Synthetic Long at Expiration

So I have had a couple of very specific questions about what happens to a synthetic long at expiration. This is one of those topics that sounds simple until you actually sit down and think through both sides of the trade. And if you do not understand it, you can end up in a situation you did not plan for.

Let's pretend today I bought a December 2027 Tesla $400 synthetic long. That means I sold the $400 put and I bought the $400 call, and I paid a $25 debit. My breakeven at expiration is my strike price plus my debit. So $425.

Now let's walk through the scenarios.

Let's say Tesla is at $401 at expiration. Did you make money on this trade? Your call is in the money by $1. Your brokerage is going to automatically give you 100 shares of Tesla at $400. But did you actually make money? No. You paid $25 for that call. So you lost $24 on this trade.

What if Tesla is at $500? Now you made money. Your breakeven was $425. The intrinsic value on this option is $100 because it is $100 in the money at expiration. So you bring in $100 minus your $25 debit and you are up $75. But here is the question you really need to understand the answer to...