You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Vertical Collar
- Thread starter iplay1515
- Start date
The real intent of the exercise of posting here is to locate valid information about a specific type of option + collar called the "vertical collar". Reading about option + collar is worthless for my purpose unless there is an explanation of a vertical collar contained therein.
A Google search on "vertical collar" + option will now result in 2 relevant hits, both of which are my forum posts here and on T2W.
Remarks that represent rhetoric without meaning are not particularly helpful.
A Google search on "vertical collar" + option will now result in 2 relevant hits, both of which are my forum posts here and on T2W.
Remarks that represent rhetoric without meaning are not particularly helpful.
The reason for the word vertical was due to an instructor's usage of the term. I understand puts, calls, spreads and collars, but vertical collar was a new one for me and not in any of my books.
A call to the CBOE Institute and help desk produced an answer, but it required the first knowledgeable person consulting with several other knowledgeable people before the term was recognized.
It appears to be a very uncommon term.
Thanks to those forum members who provided meaningful assistance.
A call to the CBOE Institute and help desk produced an answer, but it required the first knowledgeable person consulting with several other knowledgeable people before the term was recognized.
It appears to be a very uncommon term.
Thanks to those forum members who provided meaningful assistance.
Vertical collar is the same name as bull call spread, which is the sometimes just called a collar. The naming conventions of option strategies are rediculous and simply cause confusion, what matters is the payoff.
As Richard Feynman sums up about a particular type of bird; you can know the name in any language, but if you don't know what the bird does, the names are pointless.
It's called a collar because you're putting a "collar" on your gains and losses. In the vertical call spread, bull call spread, bullish collar, whatever you want to call it, you sell out of the money calls to help finance the purchase of a put option. This limits your losses (in your situation, a downward gap) and also limits your upside. You also must own the underlying, which in your case could be a stock, future, currency, etc.
It's called "inexpensive" because by selling the out-of-the-money call option you receive premium which goes towards buying the put option.
If you want further clarification let me know.
As Richard Feynman sums up about a particular type of bird; you can know the name in any language, but if you don't know what the bird does, the names are pointless.
It's called a collar because you're putting a "collar" on your gains and losses. In the vertical call spread, bull call spread, bullish collar, whatever you want to call it, you sell out of the money calls to help finance the purchase of a put option. This limits your losses (in your situation, a downward gap) and also limits your upside. You also must own the underlying, which in your case could be a stock, future, currency, etc.
It's called "inexpensive" because by selling the out-of-the-money call option you receive premium which goes towards buying the put option.
If you want further clarification let me know.