978 Glossary 
Resistance: a term in technical analysis indicating a price area higher than the cur­
rent stock price where an abundance of supply exists for the stock, and therefore 
the stock may have trouble rising through the price. See also Support. 
Return (on investment): the percentage profit that one makes, or might make, on 
his investment. 
Return if Exercised: the return that a covered call writer would make if the under­
lying stock were called away. 
Return if Unchanged: the return that an investor would make on a particular posi­
tion if the underlying stock were unchanged in price at the expiration of the 
options in the position. 
Reversal Arbitrage: a riskless arbitrage that involves selling the stock short, writing 
a put, and buying a call. The options have the same terms. See also Conversion 
Arbitrage. 
Reverse Hedge: a strategy in which one sells the underlying stock short and buys 
calls on more shares than he has sold short. This is also called a synthetic straddle 
and is an outmoded strategy for stocks that have listed puts trading. See also Ratio 
Write, Straddle. 
Reverse Strategy: a general name that is given to strategies that are the opposite of 
better-known strategies. For example, a ratio spread consists of buying calls at a 
lower strike and selling more calls at a higher strike. A reverse ratio spread, also 
known as a backspread, consists of selling the calls at the lower strike and buying 
more calls at the higher strike. The results are obviously directly opposite to each 
other. See also Reverse Hedge Ratio Write, Reverse Hedge. 
Rho: the measure of how much an option changes in price for an incremental mov<' 
(generally l % ) in short-term interest rates; more significant for longer-term or i11-
the-money options. 
Risk Arbitrage: a form of arbitrage that has some risk associated with it. Commonly 
refers to potential takeover situations in which 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. See also Dividend Arbitrage. 
Roll: a follow-up action in which the strategist closes options currently in the posi­
tion and opens other options with different terms, on the same underlying stock. 
See also Roll Down, Roll Forward, and Roll Up. 
Roll Down: close out options at one strike and simultaneously open other options al 
a lower strike.