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Thanks for the response, Mike, bear with me, I follow your comments
about put/call parity and the distinction between options equivalency
and hedging, but am still unclear about something. In "Derivatives"
by Don Chance I found this: "a combination of a long call and a short
put is equivalent to a (long) futures contract. In fact, a long-
call/short put combination is called a synthetic futures contract. A
risk-free portfolio would consist of a long futures contract and a
short synthetic futures contract." Why does this author liken the
long-call/short put to a futures contract, rather than to stock as
you have it? Chance seems to be saying that the equivalent to a long-
call/short put position (in, say, options on S&P futures) would be an
S&P futures contract, not the S&P cash...which goes back to my
original notion that only derivatives can be truly equivalent to
derivatives...
Any comments you might care to make would be appreciated...I'm very
pleased to see topics like this addressed on this site.
JeffR
--- In realtraders@xxxxxxxxxxx, MikeSuesserott@xxxx wrote:
> Suppose with JDSU at 60, we bought 10 JDSU Mar 60 calls and
simultaneously
> sold 10 JDSU Mar 60 puts. This is called a "synthetic long".
Slippage and
> brief imbalances aside, this position will behave *exactly* as if
we had
> bought 1000 shares of JDSU.
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