Session 3 - Collars: Income-Generation and Position Protection Combined
You own a stock or ETF, and you want to hedge your position. You could go a few different ways, and one that's frequently done in these situations is the collar. A collar has two parts: an investor buys a put to protect on the downside and sells a call at the same time to collect premium. In this session, we'll explore this common risk management strategy, taking you through what to know about balancing strike selections and determining whether the collar starts with a debit or a credit. Then, we'll talk about:
- Whether it may be appropriate to exit the long put if the underlying corrects
- If an investor should consider redeploying the collar when the stock consolidates
- When an investor might consider taking profits
Finally, we'll explain what it means when your underlying is in-the-money, at-the-money or out-of-the-money. Register now for session three.