The price of a long position of a stock in your portfolio is $20.You decide to buy a put with a strike price of $17.50 worth $2 and sell a call with a strike price of $22.50 also worth $2.Then you have created:

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By buying a put with a strike price of $17.50 for $2 and selling a call with a strike price of $22.50 for $2, you have limited both the potential profit and loss of holding the long position in the stock. This is known as a zero-cost collar, as the cost of the put and the premium received from selling the call cancel each other out, resulting in no net cost. A bear spread involves buying a put at one strike price and selling a put at a lower strike price, with a limited profit potential and unlimited risk. A covered call involves selling a call option against a long stock position. A butterfly spread involves buying one call option, selling two call options at a higher strike price, and buying another call option at an even higher strike price, resulting in a limited profit potential and limited risk. A straddle involves buying a call and a put option at the same strike price and expiration date, with the expectation that the stock will move significantly in either direction.

The Price of a Long Position of a Stock in Your