Put Collar

[earth_imperator]

I just invented a new options construct: PutCollar, consisting of a CashSecuredPut + LongPut,
where CashSecuredPut consists of Cash + ShortPut.
The result is a Spread:
Bullish when LongPut.K < ShortPut.K
Bearish when LongPut.K > ShortPut.K

Intended for CashAcct only, not for MarginAcct (as MarginAcct already has the similar PutSpread).

Differences:
PutCollar:
CostBasis = ShortPut.K - ShortPut.Pr + LongPut.Pr

PutSpread:
CostBasis = (ShortPut.K - LongPut.K) - (ShortPut.Pr - LpngPut.Pr)

See also:

• "Vertical Spreads: Lower Margin Requirement Hurdle to Target Capital Efficiency"
• "Options Collars: A Strategy for Straying Stocks"

 

[Robert Morse]

How is that different than a simple vertical put spread?

 

[earth_imperator]

How is that different than a simple vertical put spread?

The "Cash" part is the main difference, and that this one is intended for CashAcct only, not for MarginAcct.
Of course also the CostBasis differs, cf. OP.

 

[Overnight]

The "Cash" part is the main difference, and that this one is intended for CashAcct only, not for MarginAcct.
Of course also the CostBasis differs, cf. OP.

Couldn't someone simply do this in their margin account? What is the difference between risking 400 bux in a cash account or 400 in a margin account?

 

[earth_imperator]

Couldn't someone simply do this in their margin account? What is the difference between risking 400 bux in a cash account or 400 in a margin account?

It's not that easy, cf. the different CostBasis.
Everybody can get a CashAcct, but not so a MarginAcct with SpreadTrading permission...