How Can Options Be Used to Create a Synthetic Leveraged Long Futures Position?

A synthetic long futures position can be created by simultaneously buying a call option and selling a put option on the same underlying asset with the same strike price and expiration date. This combination is known as a 'synthetic long future' or 'conversion.' The net premium paid or received is often very small, giving the trader a position with a P&L profile similar to a futures contract, but with the leverage inherent in the option premiums.