4 ms·
Sounds interesting, how does it work?
by MichaelRazum 4y ago
Sounds interesting, how does it work?
- stocknoob 4y agohttps://www.optionsplaybook.com/option-strategies/collar-option/ https://www.optionsplaybook.com/option-strategies/collar-opt... Basically, you sell a call option, and use the proceeds to buy a protective put option. You can buy a protective put directly, but that costs money. This helps offset the cost buy selling a call. You can play with the strike prices of each to get more/less insurance depending on your risk tolerance. For example, you might sell a call 5% above current prices (expiring in a year), buy a put for 10% below prices (expiring in a year), and pocket the difference.
- rank0 4y agoCareful though. Do your reading and make sure you understand those contracts. At least understand how to roll them and how exercising works. You’ll need 100x shares of whatever you’re protecting to have the contracts match 1:1