set-up hedge

Definition

A hedging strategy in which an investor takes a long position on a convertible security and sells short a portion of the underlying security already owned. A set-up hedge is the opposite of a reverse or Chinese hedge, in which the convertible security is sold short and the underlying security is held long. The investor profits when the underlying security appreciates, which increases the premium on the convertible security. A set-up hedge is a type of convertible arbitrage.
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settlor setup price