Conversion

Long stock, long put, short call for arbitrage

What is Conversion?

Conversion An arbitrage strategy combining long stock, long put, and short call at the same strike and expiration. Creates a risk-free position that locks in a profit if the options are mispriced relative to put-call parity. Conversions are primarily used by market makers and institutional traders to exploit pricing inefficiencies.

Complete Definition

An arbitrage strategy combining long stock, long put, and short call at the same strike and expiration. Creates a risk-free position that locks in a profit if the options are mispriced relative to put-call parity. Conversions are primarily used by market makers and institutional traders to exploit pricing inefficiencies.