FENCE
A risk-mitigating investment strategy that utilizes options to limit the possible range of returns. To employ a fence, the investor purchases a security (a long position), a long put with a strike price near the spot price of the security, a short put with a strike price lower than the spot price of the security and a short call with a strike price higher than the spot price of the security. The options are typically set to expire at the same time. The option premiums should balance each other, having a net derivative investment of zero while the underlying security is bought.
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