Investor Glossary-zero cost collarInvestor Glossary-zero cost collarInvestor Glossary-zero cost collarInvestor Glossary-zero cost collarInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Zero Cost Collar

The HTML to link to this page
 

Zero cost collar or zero cost option is an option technique applied to secure a return. Also called "equity risk reversal" a zero cost collar is a type of positive carry collar. The zero cost collar is executed by buying a cap and a floor. Zero cost collar option strategies are employed for interest rates, commodities, options, and equities trading. An example of a zero cost collar option purchase is buying a put and selling a call at a lower strike price. The zero cost collar works because sale of the call will cap the return if the underlying falls in price and offsets the purchase of the put. Hedging with zero cost collar options meets FASB 133 derivatives hedging standards if the zero cost collar is written with a single underlying reference asset. Upside risk is still unlimited in a zero cost collar.



Rate this Zero Cost Collar definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: stock market close, quality assurance, reverse mortgage, Key Rate Duration, annual return, option premium, in escrow, VIX, Zero Cost Collar, ex-dividend date, deferred tax, limit order, cancelled check, open position, current ratio, labor relations, margin rate, wholly-owned subsidiary, retained earnings, implied volatility, diluted share, LIBOR, debt service coverage, APR, dividends payable, class C shares, liquidity ratio, 144a, minority interest, 1031 exchange, deferred revenue, inflation, covered put, balance sheet, phantom income, per diem, 401a, average price per share, risk management, required rate of return, FTSE, irrevocable trust, FICO score, stock split, EBITDA, ex-dividend, real GDP, 1035 exchange, command economy


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use