A riskless transaction in which the arbitrageur buys the underlying security, buys a put, and sells a call. The options have the same terms.
See Also:
Arbitrage: The simultaneous purchase and sale of two different, but related, securities with the intent of profiting by the price discrepancy.
Conversion: A strategy in which a long put and a short call with the same strike price and expiration are combined with long stock to lock in a nearly risk less profit. The process of executing these three-sided trades is sometimes called conversion arbitrage.