reverse conversion

Definition

Method by which a brokerage earns interest on its customers' stock holdings by selling a similar position short and investing the proceeds, usually in short-term money market instruments. The short position is usually hedged in order to protect against risk. The most common way of carrying out a reverse conversion is to short the stock, buy a call option and write a put option. Whether the brokerage makes money on the position depends on the borrowing costs for the short position, and the call and put premiums.
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reverse cash-and-carry-arbitrage reverse convertible bond