The Adjusted Risk Reversal - Selling Two Puts and Buying One Call

Naked puts are a popular strategy because they offer a high probability of profit, as long as the stock stays above your strike, you collect the premium. But the tradeoff is significant: if the stock drops hard, losses can be substantial. This makes naked puts less ideal when you're dealing with fast-moving stocks or when your outlook is strongly bullish.

In this article, we’ll look at an adjusted approach: a trade that keeps the high-probability structure of a naked put, but adds unlimited upside potential. The result is a more balanced risk-reward profile that can perform better in certain market conditions, especially when the stock has room to run. Most importantly, with our Custom Option Strategy Scanner, you can find setups like this in seconds. Let’s walk through how it works.

Key takeaways

• The adjusted risk reversal involves selling 2 out-of-the-money puts and buying 1 out-of-the-money call, usually for a net credit. It offers a high probability of profit with unlimited upside if the stock rallies.
• Risk is similar to a naked put: if the stock drops below the short put strike, losses increase quickly due to the double put exposure.
• It can work well when you're bullish but still want to collect premium, especially in volatile or fast-moving stocks.
• Use our Custom Strategy Scanner to find, customize, or build this setup with your own filters.

The benchmark: a simple naked short put

Let’s start with a classic naked short put: you sell one out-of-the-money put, collect a credit, and hope the stock stays above the strike. This is a highly effective and widely used strategy.  This is the typical P&L of your naked put:

If the stock price remains above the strike, you keep the premium, and this is your max profit. But if the stock drops sharply, losses are unlimited below the strike.

So you’re risking a lot to make a little. However, you have a high probability of making a profit. Wouldn’t it be better if your upside wasn’t capped? This is why we thought to introduce a 2 short puts + 1 long call version.

How the Adjusted Risk Reversal Changes the Payoff

By using part of the premium collected from selling two out-of-the-money puts, you can buy an out-of-the-money call, keeping a bullish bias and high probability of profit, while also unlocking unlimited upside if the stock rallies.

You’re still receiving a net credit upfront, and in most cases, the puts will expire worthless. But if the stock breaks out to the upside, the call adds extra profit (making the trade more attractive in bullish or volatile conditions).

Here’s a general setup guide:

Instead of focusing on specific deltas, use the scanner to filter for:

• High probability of profit
• Attractive breakeven distance
• Annualized return above 10%

This lets you focus on strong setups while customizing the trade to your market view. Visually the P/L line looks like this:

Here are the three takeaways you should remember from this P&L shape:

• Upside: unlimited: if price rallies you keep the credit.
• Flat-to-mild downside: credit still yours; long put stays out of the money.
• Crash: below the short strike, your losses will increase linearly at double the speed (the call you bought will be deep OTM, while the puts you sold will increase your loss as they will go ITM).

A Quick Numbers Example on QQQ

Let’s say QQQ is trading around $505.

You could:

• Sell 2 puts at the 455 strike for over $1.2 each
• Buy 1 call at the 575 strike for over $1

This nets you a credit of over $1.4, or more than $140 total. Your P&L would look like this:

That’s your most likely outcome: QQQ stays flat or rises moderately, both puts expire worthless, and you keep the premium.

But if QQQ really rallies above $575, your long call kicks in, and now your profits grow without limit.

On the downside, if QQQ crashes below the 455 strike, you’re exposed, as in a naked put. But the tradeoff here is key: you’ve added unlimited upside, while keeping the same short put risk profile.

This is a simple adjustment that gives you a much more balanced reward-to-risk structure.

When to Consider This Strategy

The adjusted risk reversal is best used when you have a bullish outlook and want to generate premium with a high probability of profit, but also want to keep the door open for unlimited gains if the stock surges.

It’s especially useful when you're trading volatile stocks with strong upside potential. In many of these cases, selling puts alone might offer a solid return, but caps your profit even if the stock takes off. By adding the call, this strategy helps rebalance the payoff in your favor.

Keep in mind, though, that risk remains high if the stock drops sharply. Because you’re selling two puts, downside losses can accumulate quickly. This approach is better suited for traders who are comfortable potentially owning the stock at the strike price, and who want to improve the reward side of the equation when market conditions are right.

Building the scan in Option Samurai

1. Start new Custom scan › choose Custom strategy.
2. Add legs
3. • Sell 2 Puts
   • Buy 1 Put

3. Apply filters the filters you would like. Perhaps, limit the deltas of the 2 legs, change the expiration date, etc.

Alternatively, you can refer to our predefined scan, linked at the bottom of the article.

Read More

• Learn how to build and edit your own multi-leg strategies using the Custom Strategy Scanner, the most flexible tool in our platform.
• Want to understand the basics? Check out our Naked Puts Guide to see how our new strategy compares to its simpler cousin.
• Try our predefined scan for this strategy.
• Try the strategy in our options screener.