Chapter 17 Synthetic Positions: Tracking the Stock
The number of those who undergo the fatigue of judging for themselves is very small indeed.
̶̶ Richard Brinsley Sheridan, The Critic, 1779
Among the advanced strategies available for options trading is a class of strategies that duplicates the price movement of stock, offsets or leverages price direction to hedge risk, or works with stock to create added profits without added risk. These are called synthetic positions, and they come in many forms.
Synthetics provide exceptional hedging potential to investors trying to reduce equity market risk. The extent of control investors gain using options, not to speculate, but to hedge, cannot be ignored. The
… options market provides a way to expand the ...
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