Cash Extraction Strategy

Any transaction or series of transactions in which an underlying position is exchanged for an approximately risk-equivalent derivative position that permits the investor to remove cash from the account. Adding back the cash return, the revised position should have a return pattern that replicates the original position very closely. Examples include replacing an equity or bond portfolio with futures contracts and selling an in-the-money European put to replace a long position in a security or portfolio.

Glossary * C