Cylinder

AAA

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.

INVESTOPEDIA EXPLAINS 'Cylinder'

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.

RELATED TERMS
  1. Positive Carry

    A strategy of holding two offsetting positions, one of which ...
  2. Derivative

    A security whose price is dependent upon or derived from one ...
  3. Zero Cost Collar

    A type of positive-carry collar that secures a return through ...
  4. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
  5. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
RELATED FAQS
  1. What is the difference between hedging and speculation?

    Hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Are Derivatives A Disaster Waiting To Happen?

    They've contributed to some major market scandals, but these instruments aren't all bad.
  2. Mutual Funds & ETFs

    The Alphabet Soup Of Credit Derivative Indexes

    Find out how these instruments work and how they are used in the market.
  3. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  4. Options & Futures

    Examples Of Exchange-Traded Derivatives

    We look at some of the most common exchange-traded derivatives.
  5. Options & Futures

    Advantages Of Trading Futures Over Stocks

    We look at the top eight advantages of trading futures over stocks.
  6. Options & Futures

    Top Brokers Offering Tools For Covered Calls

    Here are the brokers that offer the best tools for investors and traders to write covered calls and covered puts.
  7. Economics

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.
  8. Options & Futures

    Why Trading Coffee Futures Is A Zero Sum Game

    Coffee futures trading is as close to a zero-sum game as you might find in investing. We look at the risks and rewards.
  9. Options & Futures

    The Perks of Trading Coffee Options

    As more people begin to trade coffee, we explain how coffee options work, who uses them, what drives valuations, and the risks and rewards.
  10. Trading Strategies

    Top Day Trading Instruments

    Day trading is an intense and often appealing activity. Investopedia provides the list of top financial instruments for day trading.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center