What is Synthetic Future? Why? How? Where?

இந்த வீடியோ-வை தமிழில் காண,
   • What is Synthetic Future? ஏன் ? எப்பட...  

How to exit my ITM options? It is not liquid. - Synthetic Exit
   • How to exit my ITM options? It is not...  

This session explains about synthetic Future

1) What is  synthetic Future?
An isomorphic form of future positions through options
(a + b)2 = a2 + b2 + 2ab
Future Long = BUY ATM CE + SELL ATM PE
Nifty Future Long = BUY 12000 CE + SELL 12000 PE
Future SHORT = BUY ATM PE + SELL ATM CE
Nifty Future Long = BUY 12000 PE + SELL 12000 CE


2) Hidden secrets about synthetic future

Synthetic future effect is same in all strike prices
Buy 12000 CE + Sell 12000 PE = Buy 11000 CE + Sell 11000 PE
It need not be in ATM. It could be OTM or ITM
Generally done in long term option by big boys
Option Prices move based on future price
Time Value in CE & PE in same strike is almost equal
Nifty is @ 12000
125000 CE @ 50 – OTM option - Time value = 50
12500 PE @ 550 – ITM Option, Time Value = 50 Intrinsic Value = 500

3) BENEFITS

Less Operation Cost
STT, Stamp Duty are higher for future
No Cash Settlement for MTM loss
MTM loss can be adjusted with collateral
All months may not have Future Contract.
Example Dec 2020
Roll over cost is saved
Margin Benefits

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