What is Synthetic Future? Why? How? Where?

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

Discount Offer for Sensibull Subscription, click here.
Link: https://pages.razorpay.com/itjegan

To Open Trading and Demat Account, you can use the below link,
https://zerodha.com/open-account?c=ZMPSLL

Subscribe to CapitalZone : https://www.youtube.com/c/CapitalZone

Jegathesan Durairaj, a mathematician by qualification, an Ex-software professional and now a full time Risk Defined Option Writer. With his Open Book Strategies, he is the most known identity in twitter as itjegan, with huge followers. He had won Zerodha 60 Day Challenge – 10 Times round-the-clock. He is one of the prime Option Writing Trainer and tutored close to 1000 members till now.

He is the Mastermind of CapitalZone – Active Option Trading where Traders can avail Trading Chart with customised indicators, FNO tools and Payoff analysis. His keynote is to provide whole FNO deets to be handy for Traders in a sole place.

Now he is taking more heed on hedging portfolio in Option Writing where we might subject to more market risk. He is streamlining his strategies often and improving perpetually. At this time unfolding ways to measure good-quality Trend Following System.

Conducting workshop in all Metro Cities (Delhi, Mumbai, Bangalore, Chennai and Coimbatore) often based on queries from Traders.