Which of the following is true concerning Collars?
A) A Collar represents a potential benefit which is paid for by a potential cost.
B) They are also called cylinder options, zero cost options or range forward contracts.
C) They limit the range of price movements of the underlying asset that the buyer is exposed to.
D) All of the above.

Question

Quizplus · Accepted Answer

A Collar is a strategy that involves holding a long position in a stock, buying a protective put option, and selling a call option. It is designed to limit the range of price movements of the underlying asset, and it can be structured to have zero net cost, hence the names zero cost options or range forward contracts.

Which of the Following Is True Concerning Collars