Option Strategies
Module Units
- 1. Introduction
- 2. Why Trade Options?
- 3. Option Chain
- 4. Option Strategies
- 5. Options Buying Vs Option Selling
- 6. Long Call
- 7. Short Call
- 8. Long Put
- 9. Short Put
- 10. Long Call Vs Short Put
- 11. Long Put Vs Short Call
- 12. Bull Spread Strategy
- 13. Bear Spread Strategy
- 14. Call Ratio Back Spread Strategy
- 15. Put Ratio Back Spread Strategy
- 16. Hedging Strategy - Covered Call
- 17. Hedging Strategy – Protective Put
- 18. Collar Strategy
- 19. Straddle
- 20. Strangle
- 21. Strip Strategy
- 22. Strap Strategy
- 23. Butterfly Strategy
- 24. Modified Butterfly Strategy
- 25. Long Condor Strategy
- 26. Conclusion
Collar Strategy
From this section onwards, we will start with different volatility and range-bound strategies. First, let us begin with the understanding of a ‘Collar Strategy.’
A collar strategy is a combination of a covered call and a protective put. It can be devised by
- Buying the stock ( either cash or futures)
- Selling out of the money call
- Buying out of the money Put
This strategy limits the return of the stock or the portfolio to a specified range and can hedge a position against the volatility of the underlying asset.
If the stock rises, this strategy performs like a covered call. If the stock declines, this strategy limits the loss at the put strike price
- A collar strategy limits both gains and losses.
- The payoff from the strategy is similar to a Bull Call Spread
- Collars may be used when investors want to hedge a long position in the underlying asset from short-term downside risk.
Option Chain:
We can see that if the stock rises, this strategy performs like a covered call. If the stock declines, this strategy limits the loss at the put strike price.
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