Synthetic Futures Contract

Synthetic Futures Contract

A position created by combining call and put options for the purpose of mimicking the payout schedule and characteristics of a futures contract.

Notes:

A synthetic long futures contract is created by combining long calls and short puts. A synthetic short futures contract is created by combining short calls and long puts. In order for both combinations to be identical to a futures position, the options must have the same expiry dates and strike prices.

See also: Call, Combination, Expiration Date, Futures Contract, Long, Put, Short, Strike Price, Synthetic