Synthetic Short Futures

Example: Sell 1 call; buy 1 put
Market Outlook: Bearish
Risk: Unlimited
Reward: Unlimited
Increase in Volatility: Does not affect the position strongly
Time Erosion: Does not affect the position strongly
Break-Even Point (BEP): Strike Price of Long Put + Net Premium Received

The synthetic short futures is an options strategy used to simulate the payoff of a short futures position. It is entered by selling at-the-money calls and buying an equal number of at-the-money puts of the same underlying futures and expiration date.

This is an unlimited profit, unlimited risk options trading strategy that is taken when the options trader is bearish on the underlying security but seeks an alternative to short selling the stock.

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