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Risk Reversals
Risk reversals refer to the difference in pricing for a Put and a Call for a 25 Delta option. Supply and demand in the options market often means that these Puts and Calls, which theoretically should trade at the same volatility level, have differing prices.
The name 'Risk Reversal' comes from the fact that traders actually make markets in the price difference between the 25 delta puts and calls. The affect of buying or selling the risk reversal is to change the your risk to being:
Long Calls / Short Puts or Long Puts / Short Calls
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