How to set up a Single Stock Future!

WallStGolfer31 · #1 (**permalink**) 03-04-06, 04:34 AM

Here you have it

lehayes · #2 (**permalink**) 03-07-06, 05:22 PM

I don't understand here, to me this document sounded like it talked about a June straddle option. What makes it a future?

WallStGolfer31 · #3 (**permalink**) 03-08-06, 02:21 AM

Quote:

Originally Posted by lehayes

I don't understand here, to me this document sounded like it talked about a June straddle option. What makes it a future?

a Straddle is when you BUY 2 options, 1 call and 1 put, of the same strike and experation. With a single stock future you are BUYING a CALL, and SELLING the PUT. Thisis a long future. For a short future you want to BUY and PUT and SELL the CALL. The put, in the long senario, should cover alot of the price of the call, and should bring your net debit down considerably, due to the put call parity rule. If your doing a short future, you'll start out with a net credit, again becasue of the put call parity.

This setup mimics the way a future would react if it's underlying was a stock, thus creating a synthetic position that is called a single stock future.