Synthetic Options StrategiesThis course examines and demonstrates six specific variations of synthetic positions using options. Attendees will be expected to interact through examples and to expand on how synthetics work. Special emphasis will be placed on two major strategies: synthetic long stock and synthetic short stock Attendees will learn how synthetics move beyond the well-known spreads and straddles, and can be used to duplicate price movement in underlying stocks for little or no net cost. They will also learn how to identify risks and to select strategies appropriate for a well-defined level of risk tolerance. |
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| Experienced options traders and professionals who are well-versed in advanced strategies and who understand option risks; portfolio managers, financial advisers, and investment officers. Relevant text for this course: “The Options Trading Body of Knowledge” |
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| No advance preparation required. |
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Students will be able to:- Explain risk levels of specific synthetic positions
- know which synthetic options strategies are appropriate given risk tolerance levels
- Identify most appropriate prices and entry/exit timing for synthetics
- Appreciate how synthetic positions duplicate price movement in stock, through the use of options in place of stock positions
- Put synthetic options strategies in place as alternatives to stock positions, or to use the same synthetics to manage portfolio risk or to enhance profit potential
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| Attendees should be experienced in options trading and be completely knowledgeable about options terminology, trading and risks. This is an advanced course designed to help attendees expand existing trading skills and manage portfolio risks. |
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| Synthetic put (protected short sale)Short 100 shares of underlying; buy 1 call. Call can be exercised to cover if stock price rises; adequate price decline in stock produces profit on stock and potential profit on put.Synthetic long call (insurance put)Long 100 shares of underlying; buy 1 put. If stock rise rises, stock is profitable. If stock price declines, loss is capped with the put.Synthetic long stockBuy one call; sell one put. Position duplicates price movement in the underlying. Advantageous when price is expected to rise, but cost is minimal and in some instances, position creates a small net credit. This is one of two segments that will be emphasized in this course.Synthetic short saleSell one call; buy one put. Position duplicates price movement in the underlying. Advantageous when price is expected to decline, but cost is minimal and may consist of a small net credit. This is one of two segments that will be emphasized in this course.Split strike strategy (bullish)Sell one out-of-the-money put at lower strike, and buy one out-of-the-money call at higher strike. Profits are possible in both option positions if stock rises high enough. This is an aggressively bullish strategy.Split strike strategy (bearish)Buy out-of-the-money put and at higher strike and sell out out-of-the-money call at lower
strike. Profits are possible on both sides with steep enough price decline. This is aggressively bearish. Short call may be naked or, to reduce risk, this strategy may include ownership of 100 shares of the underlying. In the latter case, the long put also provides insurance by creating a synthetic long call as in strategy # 2 above |
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| Clients who register for this course will receive a complimentary 4-month subscription to FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. The move to the electronic version follows an ongoing review of our environmental responsibilities as a global business and as part of the Pearson group. FT.com also has features that are not available in hard copy, such as: Special Reports, Alphaville, editor blogs, education sections and much more! Subscriptions will start within 6-8 weeks of the start of class and are limited to one subscription per client. (Please note: as of May 1, 2011, the electronic subscription replaces the hard-copy 3-month Financial Times subscription.) |
Lunch is included for all students taking day classes. |
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