How to calculate equivalent futures position?

Question

Let's say I have the following two positions:

This creates a synthetic futures position. How do I calculate how many futures are required to replicate (or hedge) my options position?

vonjd · Accepted Answer · 2011-07-21 11:02:31Z

3

Perhaps I don't understand your question correctly but

one Synthetic Long Futures Construction
equals
"Buy one ATM Call" and "Sell one ATM Put"

answered Jul 21, 2011 at 11:02

vonjd

27.3k11 gold badges101 silver badges164 bronze badges

1

$\begingroup$ You are correct. I failed to see that when you have a short put and a long call, you need a short future to hedge it. I was just getting lost in my code, thanks. $\endgroup$
– sooprise
Jul 21, 2011 at 14:19
$\begingroup$ I think this confusion happens to everybody at least once. You always have to remember that replication and hedging are two opposite sites of the same coin. $\endgroup$
– vonjd
Jul 21, 2011 at 15:36
1

$\begingroup$ @sooprise If this answers your question, you can "accept" vonjd's answer by clicking the green arrow. That will indicate that this is the appropriate solution for anyone who sees your question in the future. $\endgroup$
– chrisaycock
Jul 21, 2011 at 22:45
$\begingroup$ Chrisaycock, thanks for the reminder. I'm a frequent user of StackOverflow, but when I'm in a less active sub-stackexchange, I get lazy about accepting answers. Anyway, the answer has been checked, I think we're all square now :) $\endgroup$
– sooprise
Jul 22, 2011 at 14:47

Add a comment |

1 Answer 1