Combination

Risk Reversal

A long call financed by a short put.

Expiration payoff profile for Risk Reversal
Payoff at expiration

A risk reversal begins by establishing a bullish position by buying a call option and then sells a put option, also a bullish position, in order to pay for the call option. The entire risk reversal is usually done for little or no net premium, while the risk reversal may actually generate a small amount of premium since put options are more expensive than call options, everything else being equal (time to expiration, distance from at-the-money, and so on).

A risk reversal is a bullish position, and since it's short a put option, the trader has to be willing and able to buy the stock at the strike price of the put.

Cheat sheet

Risk Reversal Cheat SheetPDF

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