Synthetics trading? Best strategy?

[ShingieUihos]

Is is advisable to trade deriv synthetics. How does one best trade them?

 

[Kei78]

Is is advisable to trade deriv synthetics. How does one best trade them?

I personally love trading the volatility 75 index. It moves extremely well. I personally use hidden divergence with the RSI, and I trade with the trend. It works great!

 

[Fxaffluent]

I personally love trading the volatility 75 index. It moves extremely well. I personally use hidden divergence with the RSI, and I trade with the trend. It works great!

Nice one!

 

[franpere]

I think that synthetic trading is very risky. do you?

 

[igogreen]

I have never heard of synthetic trading. I googled it but still confused about it. Can anyone explain it better or provide some type of example?

 

[qwertz012]

What doyou think about Phroton trading? Is it good? Is his course usefull?

 

[noahlucas]

Synthetic trading refers to creating artificial positions in the market that mimic the behavior of other financial instruments or positions. These synthetic positions are typically constructed using a combination of different options, futures, and underlying assets. The choice of the best strategy for synthetic trading depends on your specific objectives, risk tolerance, and market conditions. Here are a few common synthetic trading strategies:

1. Synthetic Long Stock: This strategy aims to replicate the performance of owning a stock by combining a long call option and a short put option with the same strike price and expiration date. It allows you to benefit from upward price movements while limiting your downside risk.
2. Synthetic Short Stock: This strategy aims to replicate the performance of short-selling a stock. It involves combining a long put option and a short call option with the same strike price and expiration date. It allows you to profit from downward price movements while limiting your potential losses.
3. Covered Call Synthetic Replication: This strategy involves selling a call option against a long position in the underlying asset. By simultaneously holding a long position and a short call option, you can replicate the payoff of a covered call strategy without actually owning the underlying asset. This strategy can generate income from the option premium and potentially offer some downside protection.
4. Synthetic Straddle: A synthetic straddle involves buying a call option and a put option with the same strike price and expiration date. This strategy benefits from significant price movements in either direction. It can be used when you expect volatility but are unsure about the direction of the underlying asset.
5. Conversion and Reversal: Conversion and reversal strategies are advanced synthetic trading techniques that aim to exploit price discrepancies between the underlying asset, options, and futures contracts. These strategies involve multiple legs and complex combinations of options and futures positions. They can be used in arbitrage opportunities or when specific market conditions exist.

When considering synthetic trading strategies, it's crucial to thoroughly understand the risks, costs, and potential limitations of each strategy. Factors such as transaction costs, liquidity, margin requirements, and market conditions should be carefully evaluated. It's also essential to stay updated with market news, monitor your positions, and consider risk management techniques to protect against unexpected market movements.
Consulting with a qualified financial advisor or professional with expertise in options and derivatives trading can provide valuable guidance and help you tailor a synthetic trading strategy that aligns with your goals and risk tolerance.