27 lines
946 B
Plaintext
27 lines
946 B
Plaintext
258 • The Intelligent Option Investor
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plan like this in place will allow you to size and time your hedges appropri-
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ately and will help you to make the most out of whatever temporary crisis
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might come your way.
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2
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Now that you have a good understanding of protective puts and
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hedging, let’s turn to the last overlay strategy—the collar.
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Collar
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Contingent Exposure
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Contingent Exposure
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Contingent Exposure
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GREEN
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LIGHT GREEN
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LIGHT ORANGE
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LIGHT RED
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ORANGE
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RED
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Downside: Irrelevant
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Upside: Undervalued
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Execute: Sell a call option on a stock or index that you own and on
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which you have a gain, and use the proceeds from the call
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sale to buy an OTM put
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Risk: Flexible, depending on selection of strikes
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Reward: Limited to level of sold call strike
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Margin: None because the long position in the hedged security
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serves as collateral for the sold call option, and the OTM
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put option is purchased, so it does not require margining |