• Risk Reversal   Risk Reversal

    A risk reversal begins by establishing a bullish position by buying a call option and then sells a put option, also a bullish position,l 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, etc.).

    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.

    See the OptionMath.com Risk Reversal Cheat Sheet