6. Generalized Synthetic Annuities

The covered SynA rules are more restrictive than necessary for an experienced options trader. Within the SynA framework, you have a great deal of flexibility in setting performance targets. If you have higher option approval trading levels, you can set up and manage SynA’s in many ways.

This chapter addresses SynA design flexibility. With a CSynA, you are restricted in the amount of theta you can generate. The only theta-generating options you have available are short calls, and you are limited in how many you can sell. With the generalized SynA, you can create additional theta by overselling calls and selling puts. A revised investment profile and a Deere example illustrate theta leverage in this chapter.

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