8.5

Hedge Stock

The investor adds a collar to an existing long stock position as a temporary, slightly less-than-complete hedge against the effects of a possible near-term decline.

This strategy consists of writing a call that is covered by an equivalent long stock position.

This strategy profits if the underlying stock moves up to, but not above, the strike price of the short calls.

The initial cost to initiate this strategy is rather low, and may even earn a credit, but the downside potential is substantial.

This strategy consists of adding a long put position to a long stock position.

Sponsored By:

  • OCC

OIC Participant Exchanges:

  • BOX
  • Cboe
  • MIAX
  • Nasdaq
  • NYSE

OCC 125 South Franklin Street, Suite 1200 | Chicago, IL 60606

This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this web site is to be construed as a recommendation to purchase or sell a security, or to provide investment advice. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606.

©1998-2018 The Options Industry Council - All rights reserved.

User acknowledges review of the User Agreement and Privacy Policy governing this site. Continued use constitutes acceptance of the terms and conditions stated therein.