Conversion Explained

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A conversion is an arbitrage strategy in options trading that can be performed for a riskless profit when options are overpriced relative to the underlying stock. To do a conversion, the trader buys the underlying stock and offset it with an equivalent synthetic short stock (long put + short call) position.

Conversion Construction
Long 100 Shares
Buy 1 ATM Put
Sell 1 ATM Call

Limited Risk-free Profit

Profit is locked in immediately when the conversion is done and it can be computed using the following formula:

Profit = Strike Price of Call/Put – Purchase Price of Underlying + Call Premium – Put Premium


Suppose XYZ stock is trading at $100 in June and the JUL 100 call is priced at $4 while the JUL 100 put is priced at $3. An arbitrage trader does a conversion by purchasing 100 shares of XYZ for $10000 while simultaneously buying a JUL 100 put for $300 and selling a JUL 100 call for $400. The total cost to enter the trade is $10000 + $300 – $400 = $9900.

Assuming XYZ stock rallies to $110 in July, the long JUL 100 put will expire worthless while the short JUL 100 call expires in the money and is assigned. The trader then sells his long stock for $10000 as required. Since his cost is only $9900, there is a $100 profit.

If instead XYZ stock had dropped to $90 in July, the short JUL 100 call will expire worthless while the long JUL 100 put expires in the money. The trader then exercises the long put to sell his long stock for $10000, again netting a profit of $100.

Note: While we have covered the use of this strategy with reference to stock options, the conversion is equally applicable using ETF options, index options as well as options on futures.


For ease of understanding, the calculations depicted in the above examples did not take into account commission charges as they are relatively small amounts (typically around $10 to $20) and varies across option brokerages.

However, for active traders, commissions can eat up a sizable portion of their profits in the long run. If you trade options actively, it is wise to look for a low commissions broker. Traders who trade large number of contracts in each trade should check out as they offer a low fee of only $0.15 per contract (+$4.95 per trade).

Reverse Conversion (Reversal)

If the options are relatively underpriced, the reversal is used instead to perform the arbitrage trade.

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the turning of a sinner to God ( Acts 15:3 ). In a general sense the heathen are said to be “converted” when they abandon heathenism and embrace the Christian faith; and in a more special sense men are converted when, by the influence of divine grace in their souls, their whole life is changed, old things pass away, and all things become new ( Acts 26:18 ). Thus we speak of the conversion of the Philippian jailer ( 16:19-34 ), of Paul ( 9:1-22 ), of the Ethiopian treasurer ( 8:26-40 ), of Cornelius (10), of Lydia ( 16:13-15 ), and others. (See REGENERATION .)

These dictionary topics are from
M.G. Easton M.A., D.D., Illustrated Bible Dictionary, Third Edition,
published by Thomas Nelson, 1897. Public Domain, copy freely. [N] indicates this entry was also found in Nave’s Topical Bible
[T] indicates this entry was also found in Torrey’s Topical Textbook
Bibliography Information

Easton, Matthew George. “Entry for Conversion”. “Easton’s Bible Dictionary”. .

$ I. The Words “Conversion,” “Convert,” in Biblical Usage.$

1. In the English Bible:

The noun “conversion” (epistrophe) occurs in only one passage in the Bible, “They passed through both Phoenicia and Samaria, declaring the conversion of the Gentiles” (Acts 15:3). Derived forms of the verb “convert” are used in the Revised Version (British and American) in James 5:19, “convert,” “converteth” (5:20), “converted” (Psalms 51:13, margin “return”), “converts” (Isaiah 1:27, margin “they that return”). In other instances where the King James Version uses forms of the verb “convert” the Revised Version (British and American) employs “turn again” (Isaiah 6:10; Luke 22:32; Acts 3:19), or “turn” (Isaiah 60:5; Matthew 13:15; 18:3; Mark 4:12; John 12:40; Acts 28:27). In Psalms 19:7 the reading of the King James Version, “The law of the Lord is perfect, converting the soul,” has been changed by the revisers into “restoring the soul.” The words commonly used in the English Bible as equivalent with the Hebrew and Greek terms are “turn,” “return,” “turn back,” “turn again” (compare Deuteronomy 4:30; Isaiah 55:7; Jeremiah 3:12; 25:5; 35:15; Ezekiel 18:21-23; 33:11; Malachi 3:7). Thus “convert” is synonymous with “turn,” and “conversion” with “turning.”

2. In the Old Testament:

The principal Hebrew word is :shubh; other words are panah, haphakh, cabhabh, in Hiphil. They are used

(2) In the later prophetical writings the verb shubh refers, both in the Qal and Hiphil forms, to the return from the captivity (Isaiah 1:27; Jeremiah 29:14; 30:3; Ezekiel 16:53; Zechariah 2:7).

(3) In the figurative, ethical or religious sense

3. In the New Testament:

The words used in the Septuagint and New Testament are strephein, and its compounds, apostr., anastr., epanastr., hupostr., and especially epistrephein. The latter word occurs 39 times in the New Testament. It is used

(2) in the figurative sense, in transitive form. (Luke 1:16; James 5:19). In Galatians 4:9 and 2 Peter 2:21 it denotes to turn from the right way to the wrong. The opposite meaning, to turn from the wrong way to the right, we find in Luke 22:32; Acts 9:35; 11:21; 14:15; 15:19; 26:18; 2 Corinthians 3:16; 1 Thessalonians 1:9; 1 Peter 2:25. In connection with metanoein, “repent,” it is used in Acts 3:19; 26:20. The root word strephein is used in the figurative sense in Matthew 18:3; John 12:40. Septuagint and Textus Receptus of the New Testament have here epistrephein.

$ II. The Doctrine.$

While the words “conversion” and “convert” do not occur frequently in our English Bible the teaching contained therein is fundamental in Christian doctrine. From the words themselves it is not possible to derive a clearly defined doctrine of conversion; the materials for the construction of the doctrine must be gathered from the tenor of Biblical teaching.

1. Vague Use of the Word:

There is a good deal of vagueness in the modern use of the term. By some writers it is used in “a very general way to stand for the whole series of manifestations just preceding, accompanying, and immediately following the apparent sudden changes of character involved” (E. D. Starbuck, The Psychology of Religion, 21). ” `To be converted,’ `to be regenerated,’ `to receive grace,’ `to experience religion,’ `to gain an assurance,’ are so many phrases which denote the process, gradual or sudden, by which a self, hitherto divided and consciously wrong, inferior and unhappy, becomes unified and consciously right, superior and happy in consequence of its hold upon religious realities. This at least is what conversion signifies in general terms” (William James, The Varieties of Religious Experience, 189). In this general, vague way the term is used not only by psychologists, but also by theological writers and in common religious parlance. A converted man is a Christian, a believer, a man who has religion, who has experienced regeneration.

2. Specific Meaning:

In its more restricted meaning the word denotes the action of man in the initial process of salvation as distinguished from the action of God. Justification and regeneration are purely Divine acts, repentance, faith, conversion are human acts although under the influence and by the power of the Divine agency. Thus, conversion denotes the human volition and act by which man in obedience to the Divine summons determines to change the course of his life and turns to God. Arrested by God’s call man stops to think, turns about and heads the opposite way. This presupposes that the previous course was not directed toward God but away from Him. The instances of conversion related in the Bible show that the objective point toward which man’s life was directed may be either the service of idols (1 Thessalonians 1:9) or a life of religious indifference, a self-centered life where material things engross the attention and deaden the sense of things spiritual (rich young ruler, Luke 18:22), or a life of sensuality, of open sin and shame (prodigal son, Luke 15:13) or even a mistaken way of serving God (Saul, Acts 26:9). Accordingly in conversion either the religious or the ethical element may predominate. The moral man who turns from self to God or, as Saul did, from an erroneous notion concerning God’s will to a clear conception of his relation to God is more conscious of the religious factor. Conversion brings him into vital, conscious fellowship with God through Jesus Christ. The immoral man who is awakened to a realization of the holiness of God, of the demands of His law, and of his own sin and guilt is more conscious of the outward change in his manner of life. The ethical change is the more outstanding fact in his experience, although it can never be separated from the religious experience of the changed relation to God.

The mode of conversion Varies greatly according to the former course of life. It may be a sudden crisis in the moral and intellectual life. This is very frequently the case in the experience of heathen who turn from the worship of idols to faith in Jesus Christ. A sudden crisis is frequently witnessed in the case of persons who, having lived a life of flagrant sin, renounce their former life. Conversion to them means a complete revolution in their thoughts, feelings and outward manner of life. In other instances conversion appears to be the climax of prolonged conflict for supremacy of divergent motives; and, again, it may be the goal of a gradual growth, the consummation of a process of discerning ever more clearly and yielding ever more definitely and thus experiencing ever more vitally truths which have been implanted and nurtured by Christian training. This process results in the conscious acceptance of Jesus Christ as the personal Saviour and in the consecration of life to His service. Thus conversion may be an instantaneous act, or a process which is more or less prolonged. The latter is more frequently seen in the case of children and young people who have grown up in Christian families and have received the benefit of Christian training. No conversions of this kind are recorded in the New Testament. This may be explained by the fact that most of our New Testament writings are addressed to the first generation of Christians, to men and women who were raised in Jewish legalism or heathen idolatry, and who turned to Christ after they had passed the age of adolescence. The religious life of their children as distinguished in its mode and manifestations from that of the adults does not appear to have been a matter of discussion or a source of perplexity so as to call forth specific instruction.

4. Conversion and Psychology:

Conversion comprises the characteristics both of repentance and of faith. Repentance is conversion viewed from its starting-point, the turning from the former life; faith indicates the objective point of conversion, the turning to God.

Of late the psychology of conversion has been carefully studied and elaborately treated by psychologists. Much valuable material has been gathered. It is shown that certain periods of adolescent life are particularly susceptible to religious influences (compare G. Stanley Hall, Adolescence, II, chapter xiv; E. D. Starbuck, Psychology of Religion, etc.). Yet conversion cannot be explained as a natural process, conditioned by physiological changes in the adolescent, especially by approaching puberty. The laws of psychology are certainly God’s laws as much as all other laws of Nature, and His Spirit works in harmony with His own laws. But in genuine conversion there is always at work in a direct and immediate manner the Spirit of God to which man, be he adolescent or adult, consciously responds. Any attempt to explain conversion by eliminating the direct working of the Divine Spirit falls short of the mark.

Conversion Disorder

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What Is Conversion Disorder?

Conversion disorder is a condition in which you have physical symptoms of a health problem but no injury or illness to explain them.

For example, imagine taking a hard fall off your bike and then not being able to move your arm. But your arm isn’t injured. Neither is any other part of your body.

Your body converted the emotional and psychological stress of your fall into the physical response of a paralyzed arm. It might seem strange, but your symptoms are real, and you can’t control them.

Experts include conversion disorder in a wider category of medical conditions called functional neurologic disorders.

Conversion Disorder Causes

Researchers are still looking for a specific cause, but they think conversion disorder happens as a way for your brain to deal with emotional stress. It’s almost always triggered by upsetting situations and other mental disorders.

Women are more likely to have it than men. It also happens more often to people who have a history of emotional stress or who have a hard time talking about their feelings.

Physical symptoms can sometimes help with an internal conflict. For example, if you’re struggling with the desire to hurt someone, conversion disorder may cause you to become paralyzed, making it impossible to act on that desire.

Conversion Disorder Symptoms

Conversion disorder symptoms usually come on suddenly and look like problems with your nervous system (brain, spinal cord, or other nerves). They include:

  • Movements that you can’t control
  • Tunnel vision or blindness
  • Loss of smell or speech
  • Numbness or paralysis

Conversion Disorder Diagnosis

There’s no test to diagnose conversion disorder. Your doctor will start by ruling out other physical, mental, or neurological causes of your symptoms. They may ask you if you’ve had any recent stressful events.

The American Psychiatric Association has set standards for symptoms to be diagnosed as conversion disorder:

  • They affect your movement or senses, and you can’t control them.
  • You’re not faking them.
  • They can’t be explained by any other condition, medication, or behavior.
  • They aren’t caused by another mental health problem.
  • They cause stress in social and work settings.


Conversion Disorder Treatment

Simply knowing that you don’t have a serious physical condition might be enough to stop the symptoms. But getting help from your doctor early on can make you feel better.

They’ll probably recommend psychotherapy treatments, including:

Conversion Disorder Outlook

Symptoms can last a few days to several weeks. They might go away as quickly as they came on. Most of the time, they’re not life-threatening. But they can have lasting effects on your quality of life if you don’t get treatment.

The best way to prevent conversion disorder is to find good ways to manage life’s stresses. Exercise and calming activities like yoga and meditation may help.

If you have a mental health condition, see your doctor regularly and take your medications as directed.


Medline Plus: “Conversion Disorder.”

National Organization for Rare Diseases: “Conversion Disorder.”

May Clinic Disease and Conditions: “Conversion Disorder.”

National Center for Advancing Transitional Sciences, Genetic and Rare Diseases Information Center: “Conversion Disorder.”

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