02-04-2011, 04:40 PM
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Uncovered & Covered Option Synthetic Futures & Options
Uncovered Option
No offsetting positions
Unlimited potential losses.
Attractive profits
Risk tolerance
Covered Option
Offsetting positions
Covered call sale= short call + Long futures
Covered put sale= short put + short futures
Synthetic Futures
Combining two option position
Synthetic long futures=long call+ short put
Synthetic short futures= long put + short call
Synthetic Option
Combining options and futures position
Long Call = Long futures + Long Put.
Short Call = Short futures + Short Put (also known as 'Covered Put').
Long Put = Short futures + Long Call.
Short Put = Long futures + Short Call (also known as 'Covered Call').