Electric Fence

A long position in an underlying instrument which sells forward at a premium is combined with a long lookback put on the full value of the underlying and a short lookback call covering enough of the notional value of the underlying to generate a premium equal to the put premium. An electric fence has a complex payoff depending on the put payout and the ultimate value of the underlying. It is safe to assume that this will never be a widely used instrument. Also called Fence or Fence Spread.

Glossary * E