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Pilot 2013 question 2

This topic has 2 replies, 2 voices, and was last updated 9 years ago by John Moffat.

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November 29, 2014 at 6:25 pm #214493
KISHA
Member
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What is the basis for choosing the 96.00 as out and 96.50 as call. I can do the futures and option but I am lost in the collar
November 29, 2014 at 6:26 pm #214494
KISHA
Member
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96 .as put sorry
November 30, 2014 at 7:57 am #214595
John Moffat
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Buying a put option at 96.00 is fixing a maximum rate (cap) of (in a perfect world) 4%.
Selling a call option at 96.50 is facing a minimum rate (floor) of (in a perfect world) 3.5%.
The reason for accepting a minimum rate is to reduce the net premium payable.
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