A riskless transaction consisting of the short sale of a security, the purchase of a call, and the writing of a put. If the value of the security increases, the call is exercised to negate the short sale. If the value of the security decreases, the put will be exercised by the holder and the received security will negate the short sale.
Related information about reversal arbitrage:
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Learn how Conversion & Reversal Arbitrage can help you make risk-free arbitrage profits in options trading.
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Figure 9: Reversal arbitrage profit in this model assumes no carrying costs and no dividend paid or received. Here you can see that the position establishes a $5 ...
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A riskless arbitrage that involves selling the stock short, writing a put, and buying a call. The options have the same terms.
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Among option arbitrage strategies, Box spread arbitrage strategies tend to give more opportunities than the conversion/reversal arbitrage strategies. As regards ...
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The return that a covered call writer would make if the underlying stock were called away. Reversal Arbitrage A riskless arbitrage that involves selling the stock ...
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Reversal Arbitrage: A riskless arbitrage that involves selling the stock short, writing a put, and buying a call. The options have the same terms. Reverse auction ...