An option trading strategy (options arbitrage) which involves buying a call and selling a put at the same strike price, then selling or taking a short position in the underlying asset. The long call and short put constitute a synthetic long underlying. This strategy aims to earn a riskless profit by capitalizing on underpriced options relative to the underlying stock.
Reverse conversion: (long call + short put) + short underlying
Reverse conversion: synthetic long underlying + short underlying
The profit can be calculated by:
Profit = sale price of underlying – strike price of call/put + put premium – call premium
