Synthetic Futures
A position created by combining call and put options. A synthetic long futures position is created by combining a long call option and a short put option for the same expiration date and the same strike price. A synthetic short futures is created by combining a long put and a short call with the same expiration date and the same strike price. |
Similar financial terms
Synthetic OptionA synthetic is an option created by trading the underlying asset.
Synthetic short sale
Buy one put option and write one call option.
Synthetics
Customized hybrid instruments created by blending an underlying price on a cash instrument with the price of a derivative instrument.
Theoretical futures price
Also called the fair price, the equilibrium futures price.
Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.
Next futures contract
The contract settling immediately after the nearby futures contract.
Nearby futures contract
When several futures contracts are considered, the contract with the closest settlement date is called the nearby futures contract. The next futures contract is the one that settles just after the nearby futures contract. The contract farthest away in time from settlement is called the most distant futures contract.
National Futures Association (NFA)
The futures industry self regulatory organization established in 1982.
Most distant futures contract
When several futures contracts are considered, the contract settling last.
London International Financial Futures Exchange
London International Financial Futures Exchange (LIFFE) is a London exchange where Eurodollar futures as well as futures-style options are traded.
The Commodity Futures Trading Commission (CFTC)
The Commodity Futures Trading Commission is the federal agency created by Congress to regulate futures trading. The Commodity Exchange Act of 1974 became effective April 21, 1975. Previously, futures trading had been regulated by the Commodity Exchange Authority of the USDA.
