collars part 2

[asdfghj7]

Would someone please advise me to the software or website that tracks the very best collar trades for stocks.

Price of XYZ 100

Example A
Long 100 shares at 100
Long Dec 100 put for 4
Short Dec 105 call for 3

Example B
Long 100 shares at 100
Long Dec 100 put for 8
Short Dec 105 call for 5

Example A has a maximum risk of 1 pt. Example B has a maximum risk of 3 pt. What software finds these collar setups with less risk up front. I failed to mention my original intentions in the earlier post. The original collar post implies that I'm looking for a riskfree grail trade. I do understand that this is a myth at best. My only inquiry is to find a software or website that finds trades with the lowest risk starting off. This is the only criteria I'm looking for. It may be the absolute worst way to trade, but I still would like the ability to find these trades without manually comparing each individual stock

 

[donnap]

Quote from asdfghj7:

What software finds these collar setups with less risk up front. I failed to mention my original intentions in the earlier post. The original collar post implies that I'm looking for a riskfree grail trade. I do understand that this is a myth at best. My only inquiry is to find a software or website that finds trades with the lowest risk starting off. This is the only criteria I'm looking for. It may be the absolute worst way to trade, but I still would like the ability to find these trades without manually comparing each individual stock

You don't need a scanner to construct collars.

What you need is a basic understanding of the put/call parity.

Define "risk free." Are you looking for a no risk of loss situation - because only conversions are risk free, bond - like trades.

The collar's " risk" is more dependent on interest rates and time than any other variables. Of course, the underlying's price, the distance between strikes, and option liquidity may impact the feasibilty of the collar.

Higher interest rates make collars seem more attractive. It's very easy to find risk free of loss collars or even put them on for credits, in high interest rate environments.

This is because the interest rate factored in to the option prices adds to the value of calls and subtracts from put values. Dividends will impact option prices subtracting from call values and adding to put values. For the nitpickers, dividends only impact expirys that come after the ex. div.

With today's low rates you will not find "low risk" situations unless you go out far enough in time and it would help if the underlying is "high priced." Also the relative distance between strikes and position of the strikes vis-a-vis price of the underlying will vary the risk of loss profile.

The collar is equivalent to a bull call spread. What you gain by using the stock/put combo is based on interest rates and the greater investment of the collar vs. the spread.