Synthetic Options Strategies

Synthetic Options Strategies - Definition


A combination of stocks and/or options that return the same payoff characteristics of another options strategy.


What Are Synthetic Options Strategies?


Synthetic Options Strategies are Synthetic Positions with the payoff characteristics of an options strategy, mimicked through the use of a combination of stocks and options. Synthetic Options Strategies are usually not put on deliberately in option trading but are usually put on as a modification to an existing option trading position or put on by accident by careless option traders combining stocks and options without careful consideration. The most common Synthetic Options Strategy is the Synthetic Long Call where an effective call option is created by combining stock with put options.



Benefits Of Synthetic Options Strategies


Synthetic Options Strategies are extremely flexible and allows you to change the directional bias of the position quickly, without selling the whole position and buying new positions. Such flexibility is also why Synthetic Options Strategies and Synthetic Positions are the favorite tools in an option trading market maker's toolbox.



List Of Synthetic Options Strategies


Here's a list of Synthetic Options Strategies:

Synthetic Long Call, Synthetic Long Put, Synthetic Short Call, Synthetic Short Put, Synthetic Straddle, Synthetic Short Straddle, Synthetic Covered Call.



Synthetic Long Call


Synthetic Options Strategy with unlimited profit potential and limited loss by combining stock with put option. Read More About Synthetic Long Call.



Synthetic Long Put


Synthetic Options Strategy with unlimited profit to downside wand limited loss to upside by combining call option with short stock. Read More About Synthetic Long Put.



Synthetic Short Call


Synthetic Options Strategy with limited profit potential while having time decay in your favor by combining short stock with short put options. Read More About Synthetic Short Call.



Synthetic Short Put


Synthetic Options Strategy with limited profit potential to downside while having time decay in your favor by combining stock with short call options. Read More About Synthetic Short Put.



Synthetic Straddle


Synthetic Options Strategy with unlimited profits to both upside and downside by combining more call options with short stock or more put options with long stock. Read More About Synthetic Straddle.



Synthetic Short Straddle


Synthetic Options Strategy that profits when the underlying stock stays stagnant. Read More About Synthetic Short Straddle.



Synthetic Covered Call


Reproducing the payoff of a Covered Call without buying the underlying stock. Read More About Synthetic Covered Call.





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