Options

Reversal (Options Arbitrage)

Definition

The opposite of a conversion: short stock, long call, short put to create a synthetic long position, exploiting temporary pricing inefficiencies between synthetic and actual positions.

Example
Reversals exploit temporary pricing inefficiencies between synthetic and actual long stock positions.
Related Terms
Arbitrage Put-Call Parity Risk Reversal Synthetic Long Stock
Frequently Asked Question
What is a Reversal in options trading?
A reversal is an options arbitrage strategy opposite to a conversion: short stock + long call + short put. It creates a synthetic long to profit from mispriced options.
APA Citation
Clark, R. (2025). Reversal (Options Arbitrage). VixShield Trading Glossary. Retrieved from https://www.vixshield.com/glossary/reversal-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.