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hi john, for the collar calculation, it says that put will be exercised if the interest rates increased.
we exercised to avoid the adverse consequences.
that means the difference between exercise price and futures price should be the gain on exercise isn’t ?
It is not us who have the right to exercise the put options.
We sold put options, and it is whoever bought them who will decide whether or not to exercise them. They will exercise them if they are to make a gain, which will therefore be a loss to us.
I do suggest that you watch my free lectures on options on interest rate futures and on the creation of collars.
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