synthetic positions

Synthetic positions are investment strategies that mimic the risk and return profile of a particular asset or investment using a combination of derivatives like options and futures, rather than owning the asset directly. This allows traders to gain exposure or hedge their positions efficiently, often with lower capital or different risk characteristics. For example, a synthetic long stock can be created with options that behave similarly to owning the actual stock, providing flexibility without physical ownership. This approach offers strategic alternatives for managing investment risks and opportunities in financial markets.