Reversal
Options strategy · Level 3 · Spreads & short options
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Short stock + long call + short put, same strike. The synthetic long (call − put) offsets the short shares: the opposite of a conversion.
Where Tradecraft teaches it
Level 3 · Spreads & short options, in the lesson “Synthetics, parity and the reversal”: Put-call parity, synthetic long stock, and why conversions and reversals lock a price.
Related terms
- ConversionLong stock + long put + short call, same strike and expiry.
- Long Box SpreadA long call spread plus a long put spread on the same two strikes.
- Parity arbitrageLocking in a mispricing between options and stock with a conversion or reversal; the edge is usually cents and can be eaten by financing, dividends…
- SyntheticBuy a call and sell a put at the same strike.
- Calendar Spread – DebitSell a near-term option and buy a longer-term option at the same strike.
- Diagonal Spread – Short leg expires firstSell a near-term option and buy a longer-term one at a different strike — part calendar, part vertical.