hi john may i ask a question ?
for the collar calculation, in the call option, we only exercise if future price is larger than the exercise price which will result into gain.
However, in this case for the collar, even if we exercise when future price is larger than the exercise price, why is it shown as loss on exercise ??
Ask the Tutor ACCA AFM
alecto co (pilot 12)
7y ago#1With a collar, they buy a put option and will only exercise it if the exercise price is higher than the futures price.
They sell a call option, and the buyer will only exercise it if the exercise price is lower than the futures price.
Have you watched my free lectures on collars?
that means whenever we are selling call or put are exercised, it's always loss ?
and gain on exercise will arise from buying call or put (depending on exercise price and future price) ?
7y ago#3Yes, but again, have you actually watched the lectures?
(You cannot expect me to type them out again here :-) )
This topic is locked — no new replies.