Vanilla Strategy


DEFINITION of 'Vanilla Strategy'

An approach to investing or to business decision-making that is basic and common. Some investors and businesses excel because they choose an ordinary, vanilla strategy, while others succeed through innovation. In derivatives trading, a vanilla strategy is the use of two different plain vanilla instruments, such as swaps, at the same time.

BREAKING DOWN 'Vanilla Strategy'

For example, a vanilla strategy for retirement saving might include saving at least 10% of one's annual income, investing in diversified portfolio of stocks and bonds through tax-advantaged savings accounts like a 401(k) and Roth IRA, and buying a home with a plan to pay off the mortgage before reaching retirement. There is nothing interesting or unique about this strategy - it is "vanilla" because it is ordinary.

  1. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
  2. Derivative

    A security with a price that is dependent upon or derived from ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Vanilla Option

    A financial instrument that gives the holder the right, but not ...
  5. Exotic Option

    An option that differs from common American or European options ...
  6. Swap

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