synthetic position

synthetic position
A hedging strategy combining futures and futures options for price protection and increased profit potential; for example, by buying a put option and selling (writing) a call option, a trader can construct a position that is similar to a short futures position. This position is known as a synthetic short futures position, and shows a profit if the futures prices decline, and receives margin calls if prices rise. Synthetic positions are a form of arbitrage. The CENTER ONLINE Futures Glossary

Financial and business terms. 2012.

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