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Zero-Cost Option


An options trading strategy which is arranged such that the premium received from an option sold (short option) compensates for the premium paid for an option purchased (long option). It is a combination of option purchase and option writing, so that the price of the short option (premium) is the same as the price (premium) paid for the long option, so the net cost is zero.

The zero-cost option is also known as a zero-cost hedge.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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