A hedge strategy known as a collar agreement involves the simultaneous
A) purchase of an in-the-money put and purchase of an out-of-the-money call on the same underlying asset with same expiration date and market price.
B) sale of an out-of-the-money put and sale of an out-of-the-money call on the same underlying asset with same expiration date and market price.
C) purchase of an in-the-money put and purchase of an in-the-money call on the same underlying asset with same expiration date and market price.
D) purchase of an out-of-the-money put and sale of an out-of-the-money call on the same underlying asset with same expiration date and market price.
E) sale of an in-the-money put and purchase of an in-the-money call on the same underlying asset with same expiration date and market price.

Question

Quizplus · Accepted Answer

A collar strategy involves buying an out-of-the-money put option and selling an out-of-the-money call option on the same underlying asset with the same expiration date. This strategy is used to hedge against large movements in the stock price.

A Hedge Strategy Known as a Collar Agreement Involves the Simultaneous