What is it when investing, what is synthetic shares?

Synthetic shares are assets created from a combination of other forms of assets. The position of the synthetic warehouse is a derivative store designed to simulate cash or point position. The options for their own options are usually used to create a synthetic stock position, the most common form is constructed using common possibilities traded in exchange. Long and short positions of synthetic supplies can be created using various combinations of put and calls. These positions duplicate profit scenarios and ownership of shares. The call and put must have the same expiration and strike price. In the case of money (ATM), the delta should be used very close to plus or minus 0.50, while the final position of the delta is zero. The theoretical costs of this trade are zero, but the broker retains enough funds to cover short option positions.

Short synthetic positions are created by purchasing aim and selling a call. The same rules apply as the expiry date and the price of the strike. Delta 0.50 states and callY are always the options of ATM, which means that the strike is very close to the actual cash value of the underlying shares. The actual cost of this store will be a small debit or credit in the account, but do not include brokerage commissions. The broker always suspends sufficient funds to cover the risk that a short option will be applied.

Options contracts are designed in many 100 shares, so one contract with options equals 100 shares of the underlying shares. When opening a long or short synthetic position of shares, the investor will control 100 shares of shares on the contract. The investor theoretically realizes profit or loss identical with long or short cash in stocks.

The advantage for synthetic positions is the ability to capture profits with less InitInvestics than buying shares directly. The investor is also responsible for losses if the shares make an unfavorable price change. Another advantage of a short synthetic position is withList short sales of shares regardless of short sales rules. The disadvantage of synthetic positions is the expiration of the contract.

Synthetic stock position can be used as part of a comprehensive business strategy. An investor who owns dividend paying shares could expect a general market decline. Instead of selling a portfolio producing income, a trader may decide to create a hedge by opening a synthetic position. This would allow the trader to take advantage of the ongoing dividend payment and avoid loss of capital as a result of the devaluation of shares.

Many other creative stores can be based on the position of synthetic supplies. The investor could add another trade to the synthetic position at any time if market conditions change. The investor could also close one leg of the trade and create a simple option position. Option trading provides the investor the opportunity to create unique and interesting positions on the stock market.