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Derivatives

  Derivatives   |   Terms
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  • February 16, 2023
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Electric Fence

A combination of a long position in a forward-delivery instrument with a long lookback put on the spot value of the underlying and a short lookback call with an offsetting premium. That is, the premium received from the short call will have to cover the one paid out for the long put. The payoff of an electric fence depends on the final value of the underlying instrument and the payout of the long put.

It is also called a fence or a fence spread.


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