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Conversion

Trading Term

An option strategy involving the simultaneous sale (or purchase) of a call option and purchase (or sale) of a put option in identical numbers, where both have the same underlying, expiration date, strike price, and underlying. For example:

  • Purchase a conversion: Sell 1 XYZ April04 75 call, Buy 1 XYZ April04 75 put, Buy 100 shares XYZ
  • Sell a conversion: Buy 1 XYZ April04 75 call, Sell 1 XYZ April04 75 put, Sell 100 shares XYZ

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