Synthetic Futures Contract

Definition of '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.

Investopedia explains 'Synthetic Futures Contract'


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.


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