DEFINITION of 'Cylinder'

A term used to describe a transaction, involving two derivatives, where there is no initial cost bourne by the investor when entering into the position.


For example, an investor can sell a derivative and use its proceeds to purchase another security. A cylinder is different from a positive carry trade since it does not necessarily imply offsetting positions.

  1. Derivative

    A security with a price that is dependent upon or derived from ...
  2. Positive Carry

    A strategy of holding two offsetting positions, one of which ...
  3. Zero Cost Collar

    A type of positive-carry collar that secures a return through ...
  4. Swap

    A derivative contract through which two parties exchange financial ...
  5. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  6. Convergence

    The movement of the price of a futures contract towards the spot ...
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