fence

Fence

A position in which an investor is long (or short) on an out-of-the-money put, long (or short) on an opposite out-of-the-money call in addition to being long (or short) on the underlying asset. Both options have the same expiration date. A fence position sets a floor and ceiling for the underlying asset and limits potential losses for the investor. It is often used by traders in farm commodities.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

fence

An investment position consisting of being long (or short) a stock or commodity, being long (or short) an out-of-the-money put, and being short (or long) an out-of-the-money call. Both options have the same expiration date.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.