March 9, 2018
A synthetic options strategy can be used to replicate the payoff profile of the underlying stock for a fraction of the capital.
This article details several synthetic overlay strategies which compliment a broader portfolio ideally suited for a semi-active investor.
A small allocation of two percent to the split-synthetic overlay creates a portfolio with significant outperformance (13.04% annually) compared with passive index holding (8.13% annually).
The synthetic overlay exhibits only slightly higher volatility and similar draw-down to the all equity portfolio, making it the dominant strategy for even relatively conservative investors.