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Enable Synthetic Futures Contract in Your Trading Strategy | Implement Synthetic Future Strategy Using Options | Calculate the Price of Synthetic Futures Nifty, Bank Nifty in TalkDelta Prime
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Explore the synthetic future strategy used in options trading, which offers flexibility and reduces costs. Discover its benefits and how to calculate synthetic future price using the TalkDelta Prime. Enable synthetic futures contract trading in your subscriptions and elevate your trading style
Exploring the World of Synthetic Futures in Trading Strategies
In the dynamic options trading world, traders have vast opportunities to profit if they know how to optimize their strategies. Among many options trading strategies in nifty and bank nifty, one strategy is synthetic future strategy. On this page, we shall see what exactly synthetic futures contract are, the benefits of using them in your trading strategy and much more.
What are Synthetic Futures Contract in Trading Strategy ?
Synthetic future strategy is one of the types of options trading strategy that utilises the combination of option contracts in a way which they seems similar to future contracts. They offer flexibility and a strategic approach to entering and trading in synthetic futures using options in the market. The key elements to creating these synthetic futures nifty include call options contracts, put options contracts, strike prices, and their expiry dates.
Benefits of Synthetic Futures Over Normal Futures
Offers high Flexibility :
Synthetic Futures empower traders with the flexibility to tailor their trading positions according to market conditions. Unlike futures contracts, synthetic futures contracts allow adjustments. nifty traders can create a wide variety of weekly expiry positions having the same risk-to-reward ratio as traditional futures contracts.
Cost-efficient :
The ability to make adjustments in the underlying asset helps in saving a lot of money. This feature attracts nifty traders, especially those who are seeking efficiency in their portfolios.
Low Margin requirements :
To enter into a synthetic future strategy, the requirement of margin is comparatively lower than the traditional futures contracts. In other words, traders can control larger positions with less capital.
Helps in managing the risk :
Synthetic futures using options contracts enable traders to manage the risk on the position more efficiently. By entering into various positions, traders can mitigate the downside risk and retain the potential for gains. This aspect of managing the risk distinguishes synthetic futures contracts from traditional ones.
How to Calculate Synthetic Futures Prices in TalkDelta Prime ?
Implement synthetic future strategy and calculating the price of the synthetic futures nifty in TalkDelta prime involves the usage of a formula that takes into consideration various parameters such as option prices, strike prices, expiry dates of the contracts, etc. You need not worry about calculating part, as knowing the price can be done in a few simple steps as below :
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Open the TalkDelta Prime website
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Go to the "Settings" tab and open - "Broadcast Settings."
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Enable "Use synthetic futures for weekly contracts."
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Save Settings and restart the Talkdelta prime exe
You can see that the tool has simplified the process for you and has given the values as per the set algorithms.
Types of Synthetic Future Strategy
There are generally two types of synthetic futures contracts using options or Nifty that can be replicated using synthetic futures contracts.
1. Synthetic future long strategy :
To create a synthetic future long strategy, traders need to buy calls and sell put option contracts having the same strike prices and expiry dates.
2. Synthetic futures short strategy :
To create a synthetic future short strategy, traders need to buy the put options contracts and sell call option contracts that have the same strike price and expiration dates.
Let us Understand the Synthetic Future Price Using an Example
For example, suppose a nifty trader wants to create synthetic future strategy using nifty options as an underlying asset. The call option price is ₹50, the put option price is ₹30, and the strike price is ₹1000; then, based on the below formula, the price of synthetic futures will be calculated as follows:
Formula :
Synthetic futures price = call option - put option + strike price
Therefore,
₹50 - ₹30 +₹1000
=₹1020
Lastly, in conclusion, this tool offer traders a dynamic and innovative way to trade synthetic futures using options. The cost-efficiency, flexibility and risk management capabilities make this trading style a compelling choice for the nifty traders. By understanding the mechanics of how the calculator works and finding the prices, traders can explore different synthetic futures contract types and use the synthetic future strategy to capitalize on market movements.
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