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.

BREAKING DOWN '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.

  1. Call

    1. The period of time between the opening and closing of some ...
  2. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  3. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  4. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  5. Combination

    The act of combining two or more financial instruments or businesses. ...
  6. Put

    An option contract giving the owner the right, but not the obligation, ...
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    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  3. Can mutual funds invest in options and futures?

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