Many investors will run a collar when they’ve seen a nice run-up on the stock price, and they want to protect their unrealized profits against a downturn.
Some investors will try to sell the call with enough premium to pay for the put entirely. If established for net-zero cost, it is often referred to as a “zero-cost collar.” It may even be established for a net credit, if the call with strike price B is worth more than the put with strike price A.
Some investors will establish this strategy in a single trade. For every 100 shares they buy, they’ll sell one out-of-the-money call contract and buy one out-of-the-money put contract. This limits your downside risk instantly, but of course, it also limits your upside.
• TRUST - How does Twitter impact your portfolio?
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• VERSATILITY - How does a Biden presidency impact your portfolio?
• DYNAMISM - Is cryptocurrency part of your 2023 portfolio?
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Intelligent portfolio design requires leveraging your performance and risk-aligned portfolios and precision tuning for the future. We empower your portfolios with intelligence to make them adaptive and robust through a variety of institutional-grade stress scenarios.
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