rgonzalez

think about what happens if you're long an FRA. you benefit if interest rates go up, and lose if they go down.

how to get the same effect from interest rate options?
the long call means you will benefit from an interest rate rise. but if interest rates fall, nothing happens to you because you simply don't exercise your option.
therefore to get the "other half" of an FRA you also need to write a put, because that will result in you losing if interest rates fall.

hope that helps.