--- title: "What are conversion and reversal arbitrage | RupeeCase" description: "A conversion is a long future, a long put and a short call at one strike and expiry." source_url: "https://www.rupeecase.com/learn/questions/conversion-and-reversal" --- On the 10 Jun 2026 chain the settlement gap is above zero on every strike shown, before any cost Call minus put, less the future minus the strike, discounted to today, in points, for strikes within two percent of the future, on the NIFTY chain of 10 Jun 2026 for the 30 Jun 2026 expiry. Settlement prices. Above zero means the conversion's fixed result is worth more than its net premium, before costs. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026. Put call parity says that a call, a put, the future and the strike, discounted to today, have to agree. A conversion makes the agreement exact: buy the future, buy the put and sell the call at one strike. Whatever the index does, that position ends worth the strike less the price paid for the future. A reversal does the opposite: sell the future, sell the put and buy the call, which fixes the future's sale price less the strike. The gap is what to measure. The chart takes the 10 Jun 2026 chain for the 30 Jun 2026 expiry, and for strikes within two percent of the future it shows the call minus the put, less the future minus the strike, discounted to today, in points. Above zero, the fixed result of the conversion is worth more today than its net premium, at settlement prices. Below zero, the reversal is the side with the gap. The gap is above zero on every strike shown, and several points wide. That is the textbook signal, and it is where a chart stops. A settlement is one closing number per contract, not the bid and offer you pay. Each of the three legs crosses a spread and carries brokerage, exchange and SEBI charges, GST and STT, plus margin on the short legs. The gap has to be larger than all of that before it is a return, and it also moves before a fill. The lesson of parity is that the three legs and the strike are tied together. A price that moves with no match in the others means the quotes disagree. It is not a forecast of the index. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) What are conversion and reversal arbitrage?A conversion is a long future, a long put and a short call at one strike and expiry, which fixes the result at expiry whatever the index does, and a reversal is the mirror image: short future, short put and long call. Either pays only when the gap between the two sides is larger than all the costs of the three legs, and a settlement gap on a chart is not that test. LGo deeper ## Where Learn teaches this. [Go deeperConversions and reversals9 min, Intermediate](/learn/path-18/module-18-2-conversions-and-reversals)[Go deeperPut call parity and synthetic positions9 min, Intermediate](/learn/path-14/module-14-10-put-call-parity)[Try itParity and box rateSynthetic futures, the parity gap and the rate a box implies.](/learn/tools/box-rate) SSources ## Go to the source. 3 sources, NISM the most cited The publisher of each source listed below. Source: Module undefined source list. 1. [NSE, equity derivatives contract specifications (expiry, settlement, exercise and lot size rules)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE 2. [SEBI investor education, Understanding derivatives](https://investor.sebi.gov.in/understanding_derivatives.html) SEBI 3. [NISM, Series VIII equity derivatives test objectives](https://www.nism.ac.in/revamp-nism/test-objectives-revised-nism-series-viii-equity-derivatives-certification-examination/) NISM ?Questions people ask ## Related questions. 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