Chapter 06 · Section 6.1

Bullish or bearish market

With a normal futures position, one would have to make or take delivery of the commodity at the expiration date. Since the synthetic was built with options, what happens at expiration will depend upon whether the market has turned bullish or bearish.

At expiration:

a) If the call expires worthless, the put will turn into the underlying.
b) If the put expires worthless, the call will turn into the underlying.
c) Both the call and the put will expire worthless.
d) b and c
e) a and b