DEFINITION of 'Zero Cost Strategy'
A trading or business decision that does not entail any expense upon execution. Zerocost trading strategies can be used with a variety of investment types, including equities, commodities and options. A zerocost business strategy might be to improve sales prospects for a home by decluttering all the rooms, packing excess belongings into boxes and moving the boxes to the garage. Zero cost strategies often involve the simultaneous purchase and sale of an asset such as that both costs cancel each other out.
BREAKING DOWN 'Zero Cost Strategy'
One example of a zerocost trading strategy is the zerocost cylinder. In this options trading strategy, the investor works with two outofthe money options, either buying a call and selling a put or buying a put and selling a call. The strike price is chosen so that the premiums from the purchase and sale effectively cancel each other out. Zerocost strategies help reduce risk by eliminating upfront costs.

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