Risk Reversal


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Risk Reversal

1. The sale of a call and the purchase of a put with the exact same terms. One conducts a role reversal when the price for the underlying asset is falling and one wishes to hedge one's risk. A risk reversal reduces profit potential and eliminates it if the underlying asset rises back above the strike price.

2. In currency options, the difference between the delta of a call and the delta of a put. Because delta is a measure of volatility, risk reversal helps one determine the potential return of investing in one as opposed to the other.
References in periodicals archive ?
50 puts on 10-year futures, along with 2k in the June 122/118 risk reversal.
The CBOE Smile Index's strategy alternates between selling a strangle (sell put/sell call) when the options smile is steep, and selling a risk reversal (sell put/buy call) when the options smile is relatively flat.
Gagnon and Chaboud (2007) documented that risk reversals increase after episodes of presumed unwinding of carry trades, in which the Yen is sharply appreciated, meaning that investors are frightened by losses, but they also found that there is no evidence of purchase of protection through risk reversal when carry trade positions are building up.
Offer risk reversal opportunities including guarantees and refunds if not satisfied, to increase the value the customer perceives.
This risk reversal occurred much sooner than the 15 years predicted in a 2004 report by the Surgeon General.
Medical care savings from workplace wellness programs will increase with time given that more eligible wellness program members participate, effective control of heightened risk factors improves, and greater risk reversal can be achieved," the report says.
com/2012/11/07/vix-futures-snapshot-vol-seems-too-low/) wrote on Risk Reversal , an options trading blog.
25-Delta Risk Reversal, the most widely used parameter in gauging market direction
There was a bit of risk reversal ahead of the G20 meeting," said a currency trader based in London.
We present a diagonal risk reversal on Gazprom, which would benefit from a short-term market surge.
The "less than full" risk reversal following treatment reinitiation in the drug conservation group could be a consequence of a lower average CD4 cell count and the increased number of patients with detectable viral load, which was likely associated with a failure to resume continuous therapy as recommended, Dr.