Zero cost collar
Zero cost collar is options collar strategy outlay on one half of strategy offsets costs of other half. The investor secures his long position in as stock that gained some important goals. To do this he buys protective put and sells covered call.
The strategy is possible only if the prices of puts and calls not always are equal. However, it is often possible to implement close to zero cost strategy. If the price of the stock changed, the maximum gain or loss will be closed within the collar. Thus investor reduces risk of losses, but also reduces won't use oppoertunities related to price growth.
- Bettis, J. C., Lemmon, M., & Bizjak, J. (1999). Insider trading in derivative securities: An empirical examination of the use of zero-cost collars and equity swaps by corporate insiders.
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