Collars vs options — OpenTuition Forums

SSaqlain7y ago

Hi John! Hope you're doing well. My first question out of the many that I might ask over the next few days is simple,# whats the difference between options and collars? The only difference I can see is that you can sell collars but you cant sell options.

John MoffatTutor7y ago#1

First you don't sell collars !!!! If you are borrowing money, then you can buy a put option in order to fix a maximum interest rate. A collar is where you buy a put option and sell a call option in order to fix a maximum and a minimum interest rate (and as a result save on the cost of the premium). You must watch my free lectures on this - I explain it all in detail, with examples. Not only is there far too much to explain here, but you cannot expect me to type out all my lectures :-)

SSaqlain7y ago#2

Oh I see. This will help! Thanks

John MoffatTutor7y ago#3

You are welcome :-)

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