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Collar

Collar is a strategy with options which limits the value of the portfolio between two values.

For example, let's say that investor holds one stock with current price of 100$. By buying put option with the strike price of 90$ the investor is limiting to portfolio below to 90$. If the investor collects money for this option by selling call option with strike price of 110$, he has limited the value of the portfolio to 110$ (price of put and call option is close, so investor actually does not invest money).


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