Options arbitrage trades are commonly performed by floor traders in the options market to earn small profits with very little or zero risk. Traders perform conversions when options are relatively overpriced by purchasing stock and selling the equivalent options position. When the options are relatively underpriced, traders will do reverse conversions or reversals. In practice, actionable option arbitrage opportunities have decreased with the advent of automated trading strategies.
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Reversal
January 12, 2023
1 minute read
Written By: Ehsan Jahandarpour