Cash Trigger

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DEFINITION of 'Cash Trigger'

A condition that triggers an investor to make a trade or take a specific action, such as a purchase, sale of the security, or the purchase or sale of a derivative (such as an option) of that security.

BREAKING DOWN 'Cash Trigger'

If XYZ stock rises from $20 to $40 a share, an investor could sell the stock outright, or sell calls against the stock in an effort to garner income. Again, the cash price is ultimately the trigger or determinant that stimulates some future action.

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RELATED FAQS
  1. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  2. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  3. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  4. What is the difference between derivatives and options?

    Options are one category of derivatives. Other types of derivatives include futures contracts, swaps and forward contracts. ... Read Full Answer >>
  5. How are rights distributed in a rights offering?

    In a rights offering, rights are distributed to shareholders based on the number of shares they already own. What Is a Rights ... Read Full Answer >>
  6. What risks should I consider taking a short put position?

    The risks to consider before taking a short put position are the odds of sustained weakness in the asset price and a spike ... Read Full Answer >>

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