Reversal

A Reversal is a strategy typically used by floor traders to capitalize on price discrepancies that arise between the stock and options markets. A Reversal, also known as a Reverse Conversion, is constructed from a Synthetic Long Stock (a short put and a long call at the same strike), offset by a short position in the underlying stock.

Reversals are used when puts are overpriced relative to calls and when the underlying stock lags a loss anticipated by the options market. Assuming a sufficient gap exists to cover trading costs, a Reversal produces a riskless profit. If you set up a Reversal and find that the profit line falls below the X-axis, you can effect a reversal of fortunes by selling your Reversal short. That strategy is known as a Conversion. It can be emulated by complementing the buy/sell sense of the options in the Reversal, i.e. by buying the put and selling the call, thereby saving you from re-entering any costs you have modeled here.

That said, significant caveats apply.