Reversal (Reverse Conversion)

Short stock, short put, long call for arbitrage

What is Reversal (Reverse Conversion)?

Reversal (Reverse Conversion) The opposite of a conversion: short stock, short put, and long call at the same strike and expiration. Like a conversion, it exploits mispricing relative to put-call parity. If options are underpriced relative to the stock, a reversal captures the arbitrage profit.

Complete Definition

The opposite of a conversion: short stock, short put, and long call at the same strike and expiration. Like a conversion, it exploits mispricing relative to put-call parity. If options are underpriced relative to the stock, a reversal captures the arbitrage profit.