Define a 'Synthetic Option' and Explain Its Use in Non-Public Trading ⎊ Path

Define a ‘Synthetic Option’ and Explain Its Use in Non-Public Trading.

A synthetic option is a position constructed using a combination of the underlying asset and other derivatives, such as futures or forwards, to replicate the payoff profile of a standard option. In non-public trading, synthetic options allow institutions to manage risk or take a desired market view without directly trading the standard option contract.

This can be useful for avoiding liquidity constraints or for executing a highly customized risk exposure not available on public exchanges.

What Is the Concept of a “Synthetic Future” Created Using Options?

Why Is the Risk Profile of a Short Synthetic Future the opposite of a Long One?

What Is a “Synthetic Long” Position Created Using Delta and the Underlying?

How Does Netting Contribute to Reducing Overall Credit Exposure for a CCP?

Explain the Concept of “Synthetic Options” and How They Are Constructed Using the Underlying Asset and Other Derivatives

In Options Trading, What Is a “Synthetic Future” and How Does It Relate to Hedging?

How Do Synthetic Derivatives Help Bypass Regulatory Restrictions in Certain Jurisdictions?

What Is the ‘Put-Call Parity’ Theorem and Its Importance in Derivatives Pricing?

Glossar

Customized Risk Exposure

Calibration ⎊ Customized Risk Exposure within cryptocurrency derivatives represents a dynamic process of aligning portfolio sensitivities to pre-defined risk tolerances, acknowledging the inherent volatility and non-linear payoff profiles characteristic of these instruments.