Home > Strategy Index
Synthetic Position
There is a synthetic equivalent for all of the basic positions in an underlying stock and its corresponding options. In other words, the risk/reward profile of any position can be simulated using a complex combination of the other basic positions. These equivalents are known as synthetic underlying and synthetic options respectively for stock and options positions.
Options Arbitrage
Synthetic positions are often used to perform arbitrage trades in options trading. When prices are right, the arbitrager can make a risk-free profit by going long/short on one position while simultaneously selling/buying the equivalent synthetic position.