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RISK REVERSAL

Risk Reversal Option Strategy
This strategy protects an investor from unfavourable price movements in the position but limits the profits can be made on that position. A risk reversal is a hedging strategy that protects a long or short position by using put and call options. In this one option is buying and other is written. In this strategy the trader has to pay a premium, while the written option produces premium income for the trader. In this the trader who hold a long position short a risk reversal by purchasing a call option and writing a put option.
Risk-: Unlimited
Reward-: Unlimited
Example-:
If ABC is trading Rs.100 and is expected to trade higher over the next year, a trader could buy a 120 strike price call and sell an 80 strike price put for the following price:
• Buy 1 ABC 120 strike price call for Rs.6
• Sell 1 ABC 100 strike price put for Rs.7
• Total premium = Rs.1 credit
If the stock trades up to Rs.130 at expiration, the investor will have a Rs.10.00 gain on the call, as the stock has exceeded the 120-strike price by Rs.10. However, because they received a Rs.1.00 credit for the risk reversal, the investor will have a net gain of Rs.11.00.
Options Trading Strategies
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- LONG STRADDLE
- SHORT STRADDLE
- LONG STRANGLE
- SHORT STRANGLE
- LONG CALL BUTTERFLY
- SHORT CALL BUTTERFLY
- LONG PUT BUTTERFLY
- SHORT PUT BUTTERFLY
- STRAP
- STRIP
- LONG CALL LADDER
- LONG PUT LADDER
- SHORT CALL LADDER
- SHORT PUT LADDER
- LONG CALL CONDOR SPREAD
- SHORT CALL CONDOR SPREAD
- NEUTRAL CALENDAR SPREAD
- LONG GUTS
- SHORT GUTS
- RATIO CALL SPREAD
- RATIO CALL WRITE
- RATIO PUT SPREAD
- RATIO PUT WRITE
- IRON CONDORS
- IRON BUTTERFLY
- REVERSE IRON CONDOR
- REVERSE IRON BUTTERFLY
- PROTECTIVE COLLAR
- SHORT STRANGLE
- LONG STRADDLE
- THE COLLAR
- SHORT PUT BUTTERFLY
- LONG PUT LADDER
- STRAP
- COVERED COMBINATION
- BEAR CALL SPREAD
- LONG STRANGLE
- SYNTHETIC LONG CALL
- IRON CONDORS
- RISK REVERSAL
- SHORT STRADDLE
- RATIO PUT SPREAD
- LONG GUTS
- SHORT CALL
- PUT BACKSPREAD
- PROTECTIVE CALL
- LONG CALL CONDOR SPREAD
- SHORT PUT LADDER
- COVERED PUT
- LONG COMBO
- PROTECTIVE COLLAR
- MARRIED PUT
- CHRISTMAS TREE SPREAD WITH CALL OPTION STRATEGY
- DIAGONAL BULL CALL SPREAD
- REVERSE IRON CONDOR
- LONG CALL BUTTERFLY
- CHRISTMAS TREE SPREAD WITH PUT OPTION
- RATIO CALL WRITE
- STOCK REPAIR
- BULL CALL SPREAD
- BEAR PUT SPREAD
- PROTECTIVE PUT
- SHORT PUT
- LONG PUT
- BULL PUT SPREAD
- LONG CALL LADDER
- SHORT CALL CONDOR SPREAD
- SHORT CALL BUTTERFLY
- SHORT GUTS
- LONG CALL
- STRIP
- IRON BUTTERFLY
- REVERSE IRON BUTTERFLY
- RATIO PUT WRITE
- SHORT CALL LADDER
- RATIO CALL SPREAD
- NEUTRAL CALENDAR SPREAD
- DIAGONAL BEAR PUT SPREAD
- COVERED CALL
- CALL BACKSPREAD
- LONG PUT BUTTERFLY
- BULL CALENDER SPREAD