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Let's say I have the following two positions:

  1. Buy ATM SPX call, expires in 1 month
  2. Sell ATM SPX put, expires in 1 month

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

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Perhaps I don't understand your question correctly but

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

(see e.g. here: http://www.theoptionsguide.com/synthetic-long-futures.aspx)

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    $\begingroup$ 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 '11 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 '11 at 15:36
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    $\begingroup$ @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 '11 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 '11 at 14:47

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