Sunday, December 09, 2018
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non-synthetic futures and option strategies

box or conversion/reversal


a conversion is an arbitrage strategy in options trading that can be performed for a riskless profit when options are overpriced relative to the underlying stock. to do a conversion, the trader buys the underlying stock and offset it with an equivalent synthetic short stock (long put + short call) position.

conversion construction
long 100 shares
buy 1 at the money put
sell 1 at the money call

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