Conversion Calculator

By Dennis Bosmans · Updated June 2026 · 2 min read · Risk disclaimer

A conversion owns 100 shares and wraps them in a synthetic short — long a put and short a call at the same strike. The combined position has a fixed value regardless of where the stock goes: a defined, near-riskless arbitrage that captures small mispricings in put-call parity.

Interactive calculator

Edit the price, strikes and premiums to see the payoff update live.

Underlying price

tool_long100 sharesEntry

tool_longPUTStrike Premium

tool_shortCALLStrike Premium

Want probability of profit and live Greeks on real prices? Open the Conversion calculator →

Open the Conversion calculator →

Key characteristics

Own stock + long put + short call at the same strike: a locked, flat payoff.
Profit/loss is essentially fixed, set by put-call parity and the cost of carry.
A market-maker / arbitrage structure, not a directional trade.
Edge is tiny in practice — fees, spreads and early assignment usually eat it.

How a conversion works

The long put and short call at the same strike form a synthetic short stock. Combine that with the 100 real shares you own and the directional exposure cancels out — the position is worth the strike at expiration no matter what, so the payoff is a flat line.

Any profit comes from a mispricing: if the call is rich relative to the put (after interest and dividends), the locked-in value sits slightly above your cost. This is the practical expression of put-call parity.

Risks and reality

On paper it is riskless, but real frictions bite: commissions and bid/ask spreads on three legs, the cost of carrying the shares, dividend timing, and the chance of early assignment on the American-style short call, which breaks the lock.

Conversions are mainly a tool for market-makers managing inventory and financing, and a teaching example of put-call parity. Retail traders rarely capture a net edge after costs.

Worked example. A stock trades at $100. You own 100 shares, buy the $100 put and sell the $100 call. The synthetic short (long put, short call) offsets your shares, so the position is worth about $100 per share at expiration whatever happens. Your profit is the small fixed amount baked in by the option prices and carry — often just a few dollars before costs.

Calculate it live

Use the free OptionProfit Conversion calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.

Key takeaways

Long stock + long put + short call (same strike) = a locked, flat payoff.
It captures put-call-parity mispricing, not market direction.
Near-riskless in theory; fees, carry and early assignment erode it in practice.
Primarily a market-maker and educational structure.

Frequently asked questions

Is a conversion really risk-free?

Almost, in theory — the payoff is fixed. In practice early assignment on the short call, dividends, carrying costs and three sets of commissions and spreads can wipe out the tiny edge.

What is the difference between a conversion and a reversal?

A conversion is long stock wrapped in a synthetic short; a reversal (reverse conversion) is short stock wrapped in a synthetic long. They are mirror images that profit from opposite mispricings.

Why learn conversions at all?

They are the clearest practical demonstration of put-call parity and how synthetics work, which underpins almost every multi-leg options strategy.

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss. Privacy Policy · Terms & Conditions.