Strategies · Library · Options
§2.10Trend
Long synthetic forward
Buy an at-the-money call and sell an at-the-money put at the same strike and expiry. The pair behaves like holding the stock or a forward to that date, for little or no net cash.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Options
- Held for
- To expiry
- Data
- ARCANE has part of the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Plainly bullish: wants stock-like exposure without buying shares.
- Entry and exit
- Buy a call and sell a put, both at the current price, same expiry. Hold to expiry or unwind when the target is hit; net premium is close to nothing.
- Sizing
- 1:1 (one long call, one short put)
How it fails
- Loss is nearly the whole stock price if it goes to zero
- Gain is unlimited, like owning the stock
- Margin is needed for the short put; cost of carry matters
- Assignment on the short put
Data it needs
- options chain with strikes and premiums
- implied volatility by strike and expiry
- underlying daily price
ARCANE has the underlying daily close but no options chains, strikes or implied volatilities
How ARCANE uses it
Matches any plain bullish Call that an asset ends higher; the one-way exposure is the same. Paper only.
Builds as a long-only proxy. Holding the underlying captures the exposure; the option pair itself cannot be built.
Filed under the trend card
Hold each market in the direction of its own return over the past year, and size every position to the same expected volatility.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 100% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §2.10, p. 22 of the SSRN version. Described in our words. Trend is ARCANE’s filing, not the book’s.