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Risk Reversal

Trading Term

An option strategy that involves simultaneously buying (or selling) a put option and selling (or buying) a call option, where both have the same underlying and expiration date, but the call generally has a higher strike price. For example:

  • Purchase a risk reversal: Buy 1 XYZ April04 75 put, Sell 1 XYZ April04 95 call
  • Sell a risk reversal: Sell 1 XYZ April04 75 put, Buy 1 XYZ April04 95 call

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