Discount Arbitrage: A riskless arbitrage in which a discount option is purchased and an opposite position is taken in the underlying security. The arbitrageur may either buy a call at a discount and simultaneously sell the underlying security (basic call arbitrage) or may buy a put at a discount and simultaneously buy the underlying security (basic put arbitrage).

Arbitrageur: An individual or company that takes advantage of momentary disparities in prices between markets which enables them to lock in profits because the selling price is higher than the buying price.

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.

Risk Arbitrage: A form of arbitrage that has some risk associated with it. Commonly refers to potential takeover situations where the arbitrageur buys the stock of the company about to be taken over and sells the stock of the company that is effecting the takeover.

Reversal Arbitrage: A riskless arbitrage that involves selling the stock short, writing a put, and buying a call. The options have the same terms.

Conversion Arbitrage: A riskless transaction in which the arbitrageur buys the underlying security, buys a put, and sells a call. The options have the same terms.