what is the risk reversal 
risk reversal is the same strategy as a zero cost collar you sell a call and buy a put on a long position to minimize the risk of significant losses the bottom linethe zero cost collar is a long position strategy that protects you from significant losses if the market drops to create the collar you buy a put with a lower strike price and sell a call with a higher strike price this creates a safety net for you but also limits how much you can make on the underlying asset if the call purchaser exercises there are other strategies that traders use to manage risk reversal the fence is one of these strategies and uses three option contracts instead of the collar s two the comments opinions and analyses expressed on investopedia are for informational purposes online read our warranty and liability disclaimer for more info correction may 20 2023 a previous version of this article mistakenly stated that a trader needed to buy a call and put option to create a zero cost collar this was inaccurate as a trader buys a call and sells a put to create the collar 