Suppose you are short a call and long a put on the S&P 500 index with the same strike and same maturity. Then, you are essentially holding
A) A long forward on the S&P 500 index
B) A long straddle on the S&P 500 index
C) A short forward on the S&P 500 index
D) A short straddle on the S&P 500 index

Question

Quizplus · Accepted Answer

Being short a call and long a put with the same strike and maturity creates a synthetic position that mimics being short on the underlying asset, in this case, the S&P 500 index. This is equivalent to a short forward position on the index.

Suppose You Are Short a Call and Long a Put