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A risk reversal

January 8, 2018

In FX markets, having a long position in a call option and a short position in a put option is called a risk reversal.

This is also known as a collar trade.

Most commonly to hedge you buy a put which OTM (Out of the Money) for downside protection and offset the cost of the hedge by selling (writing) a call, this is a short position in a risk reversal.

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From → Asset Valuation

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