Options

Conversion (Options Arbitrage)

Definition

An options arbitrage strategy combining a long put, short call, and long stock to create a synthetic short position when options are mispriced relative to the underlying.

Example
Conversion locks in risk-free profit when the synthetic short price differs from the actual stock price.
Related Terms
Arbitrage Put-Call Parity Risk Reversal Synthetic Long Stock
Frequently Asked Question
What is a Conversion in options trading?
A conversion is an arbitrage strategy: long put + short call + long stock. It creates a synthetic short and profits when options are mispriced. Reversals are the opposite trade.
APA Citation
Clark, R. (2025). Conversion (Options Arbitrage). VixShield Trading Glossary. Retrieved from https://www.vixshield.com/glossary/conversion-options
RC
Russell Clark, FNP-C
Author of SPX Mastery series · Founder of VixShield
Last updated:  ·  Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.