Reverse Conversion

A finance and risk management technique based on a put-call parity strategy that consists of selling a put and buying call (a synthetic long position), while shorting the underlying stock. As long as the put and call have the same underlying, strike price and expiration date, a synthetic long position will have the same risk/return profile as ownership of an equivalent amount of the underlying stock.

Investopedia Says:
In a typical reverse-conversion transaction, a brokerage firm short sells stock and hedges this position by buying its call and selling its put. Whether the brokerage firm makes money depends on the borrowing cost of the shorted stock and the put and call premiums, all of which may render a return better than the money market with very low risk. In the context of futures markets, a trader would be synthetically long and short the underlying futures while looking for arbitrage opportunities.

Related Links:
An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them. Options Basics Tutorial
Look at trades that are profitable when the value of corresponding puts and calls diverge. Put-Call Parity and Arbitrage Opportunity
Learn how to buy calls and then sell or exercise them to earn a profit. Going Long On Calls
Learn to make money on a falling stock. Prices Plunging? Buy A Put!

Technique whereby brokerage firms earn interest on their customers' stock holdings. A typical reverse conversion would work like this: A brokerage firm sells short the stocks it holds in customers' margin accounts, then invests this money in short-term money market instruments. To protect against a sharp rise in the markets, the firm hedges its short position by buying Call options and selling Put options. To unwind the reverse conversion, the firms buys back the stocks, sells the call, and buys the put. See also Margin Account; Option.