Put-Call-Futures Arbitrage Using Synthetic Forward Spreads

Summary

This strategy compares a futures price with a synthetic forward price formed from a call, a put, and their shared strike. It calculates the synthetic price as call price minus put price plus strike, then measures its difference from the futures price. When the spread exceeds a positive or negative entry threshold, it targets offsetting positions across the call, put, and futures contracts. Positions are closed when the spread returns to or crosses zero.

The implementation builds bars from incoming ticks and submits orders across all three instruments, adjusting order prices by a fixed amount. It is an example of a parity-style relative-value strategy, but it supplies no backtest, profitability evidence, or discussion of fees, liquidity, contract multipliers, or execution risk. The code also leaves some position targets at their initial values in certain branches, so careful review is needed before relying on its position management.

Key ideas

• The synthetic forward value is calculated from call and put prices plus the strike.
• The strategy compares this value with the futures price to identify a spread deviation.
• It targets a three-leg position across calls, puts, and futures when the spread passes an entry threshold.
• Positions are intended to close when the spread reverts to zero, but implementation details warrant review.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.