A synthetic underlying position synthetically duplicates the payoff of a long underlying position with a long call and short put at the same strike and expiration. For example, a position which is long a 60-strike call and short a 60-strike put will always result in purchasing the underlying for 60 at exercise or expiration. If the underlying is above 60, the call is in the money and will be exercised; if the underlying is below 60 then the short put position will be assigned, resulting in a (forced) purchase of the underlying at 60.
A synthetic underlying position has the same delta as the non-synthetic (real) underlying position.
When the underlying is stock, a synthetic underlying position is sometimes called synthetic stock.
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