The term “Synthetic Derivative” refers to derivatives emulating their underlying asset (which could be a stock, a commodity, an index e.t.c.), but at the same time changing essential characteristics like the methodology of its price price calculation. The methodology applied to their price calculation is exactly what makes them such complex products.
Just like all similar products, Synthetic Derivatives give traders the opportunity to speculate on price changes without the actual need of owning the traded financial instrument. They are contract-based, meaning you can trade a given number of contracts, and each one of them will correspond to a base amount of the asset in question.
Before trading Synthetic Derivatives, we kindly advise you to get familiar with the Key Information Document, Methodology, as well as the Performance Scenarios in order to obtain a better understanding of all the risks that are inherent in operating such derivatives. Risks that may involve, among others, is the sudden and dramatic change in the asset’s price.
Each Synthetic Derivative has a specific leverage factor, which aims to replicate a multiple of the performance of its underlying asset. In other words, leverage factor is the multiplier by which the leveraged index intends to perform, relative to the parent index.
CFDs and FX are leveraged products. Trading CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, CFDs may not be suitable for all investors because you may lose all your invested capital. Please refer to the full Risk Disclaimer.