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In finance, a collar is an option strategy that limits the range of possible positive or negative returns on an underlying to a specific range. A collar strategy is used as one of the ways to hedge against possible losses and it represents long put options financed with short call options. [1]
The collar is useful for reducing or delaying taxes for large stock positions which otherwise would need to be sold in order to diversify, reduce risk, etc. The following calculation assumes the sold call option and the purchased put option are both out-of-the-money and the price of the stock at expiration is the same as at entry:
Collar - buy the underlying and then simultaneous buying of a put option below current price (floor) and selling a call option above the current price (cap). Condor – combination of two vertical spreads, similar to a butterfly but with a range of underlying values yielding the maximum profit.
If you own stock, you own part of a company. It's as simple as that. Those shares are literal shares in the success (or failure) of a company. If the company does well, you can benefit from its ...
A stock buyback, or share repurchase, is when a company repurchases its own stock, reducing the total number of shares outstanding. In effect, buybacks “re-slice the pie” of profits into fewer ...
A final stock price between $18 and $19 would provide you with a smaller loss or smaller gain; the break-even stock price is $18.65, which is the higher strike price minus the credit. Traders often scan price charts and use technical analysis to find stocks that are oversold (have fallen sharply in price and perhaps due for a rebound) as ...
Circa 1817, First Lieutenant Charles Rumsey Broom, USMC, sports a black leather stock beneath a high collar, which gave birth to the term "leatherneck" Leatherneck is a military slang term in the U.S. for a member of the United States Marine Corps. It is generally believed to originate in the wearing of a "leather stock" that went around the neck.
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