Max profit
Unlimited
Risk reversal calculator
Sells a put to pay for a call: a bet on direction, often for little or no money. Enter your strikes and price to see the maximum profit, maximum loss, breakeven, profit chance and expected value.
Leave the price empty to estimate it from implied volatility. Results are per contract (100 shares), held to expiration.
Estimated debit: $0.22 per contract (from implied volatility; type your real price above)
Max loss
−$9,200.22
Breakeven
$109.00
Profit chance ?
10.8%
Expected value ?
−$0.67
Get the full verdict on this trade
Free, no account. The app adds volatility skew, exit plans, position sizing and a plain-English verdict.
How to use the risk reversal calculator
- Enter the stock's price, the days left until expiration and the implied volatility from your option chain.
- Enter each strike. Then type the price and pick credit or debit per share, or leave it empty for an estimate.
- Add the stock's realized volatility to see expected value: what the trade makes on average if the stock keeps moving the way it has been.
Worked example
Say a stock trades at $100, options price in 25% implied volatility, and the stock has really been moving about 20% a year (its realized volatility). With 30 days to expiration, a risk reversal at strikes 92 / 109 costs close to nothing (the options roughly pay for each other).
- Max profit: unlimited
- Max loss: $9,200.22
- Breakeven: $109.00
- Profit chance, market-implied: 10.8%
- Expected value with 20% realized volatility: −$0.67 per contract
This trade has little exposure to volatility itself, so its expected value stays close to zero. How it turns out depends mostly on which way the stock moves.
What is a risk reversal?
A bullish risk reversal sells an out-of-the-money put and buys an out-of-the-money call.
How it makes or loses money
Between the strikes, little happens. Above the call it gains like owning shares; below the put it loses like owning shares.
When traders use it
Used for a directional view when puts are expensive relative to calls (put skew pays for the call).
Profit and loss at expiration
- Max profit: uncapped above the call strike
- Max loss: large below the put strike
- Net cost: often near zero
The Greeks
| Greek | Sign |
|---|---|
| Delta | + |
| Theta | ≈ 0 |
| Vega | ≈ 0 |
| Gamma | ≈ 0 |
What to watch out for
- It's a stock-like position on both sides of the range.
- Size on the stress loss: the downside is the same as a naked put.
Questions
What is the max profit on a risk reversal?
Uncapped above the call strike. In the example above that's unlimited per contract.
What is the max loss on a risk reversal?
Large below the put strike. In the example above that's $9,200.22 per contract.
How do you calculate the breakeven of a risk reversal?
Net cost: often near zero. The calculator works it out from your strikes and price.
What does "profit chance" mean here?
It's the market-implied chance that the trade finishes with any profit at expiration, if the stock moves as much as implied volatility prices in. It assumes you hold to expiration and uses one volatility for every strike. A high profit chance doesn't mean a good trade: small, frequent wins can still lose money overall if the losses are large.
What's the difference between implied and realized volatility?
Implied volatility is how much movement option prices assume. Realized volatility is how much the stock has actually been moving. Option sellers tend to come out ahead on average when realized stays below implied, and buyers when it runs above. Expected value in this calculator uses the realized volatility you enter.
Is a risk reversal a good trade?
This calculator can't tell you that, and neither can anyone who doesn't know your account, goals and risk tolerance. It shows the math for the numbers you enter. Whether those numbers hold up depends on the price you actually get, how the stock moves and how you manage the trade.