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directional

Synthetic Position

"Hides directional intent from market"

Replicating the payoff profile of a direct asset ownership using a combination of options or other derivatives, often to obscure intent or bypass restrictions.

How It Works

  1. 1

    Buy Call + Sell Put (at same strike) = Synthetic Long Stock

  2. 2

    Sell Call + Buy Put = Synthetic Short Stock

  3. 3

    Positions appear as 'options flow' rather than direct accumulation

  4. 4

    Can be done via OTC swaps (Total Return Swaps) for anonymity

Key Mechanics

Put-Call Parity

Delta One exposure

Counterparty risk (facing the bank, not the exchange)

Voting rights often decoupled from economic exposure

Regulatory Context

13D rules historically focused on voting shares, allowing synthetic accumulators to hide longer. Regulations are catching up.