- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
Good day,
when you borrow , you sell put options to hedge the risk.
when you receive you buy call options to hedge the risk.
based on my understanding of collars is that based on your transaction (borrow or receive) money, you buy the option at the lower premium, and sell at the other exercise price.
So if the option you sell in order to reduce the premium on the option you buy is exercised, then you loose money since you will have payout the difference in futures rate and the exercise price.
kindly let me know if my understanding is correct.
Viewing 2 posts - 1 through 2 (of 2 total)
- The topic ‘INTEREST RATE COLLAR’ is closed to new replies.