Option Trading: Conversions, Reversals, Box Spreads, and Arbitrage
Interactive

Option Trading: Conversions, Reversals, Box Spreads, and Arbitrage

Intuition Publishing
Updated Sep 24, 2020

Here we begin by describing various different option strategies, such as conversions, reversals, and box trades, and discuss how transaction costs and the forces of supply and demand ensure a lack of arbitrage opportunities. We then outline two of the most basic protective option strategies, the covered call, and the protective put.