What strategy is designed to ensure a value within the bounds of two different stock prices?
A) collar
B) covered Call
C) protective put
D) straddle

Question

Quizplus · Accepted Answer

A collar strategy involves purchasing a put option to establish a floor price for the stock and selling a call option to establish a cap price for the stock. This ensures that the value of the stock stays within the bounds of these two prices. Covered call and protective put strategies involve buying or selling only one option, which does not provide the same level of protection against price fluctuations. A straddle strategy involves buying both a call and a put option at the same strike price, which could result in higher costs and does not necessarily provide a specific price range for the stock.

What Strategy Is Designed to Ensure a Value Within the Bounds