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Zero Cost Collar

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Zero Cost Collar
An investment strategy in which one buys or sells one position while taking an opposite position for the same price that will limit both the return and the risk of one's investment. An investor sells a position that caps return while buying one that limits loss, while a borrower does the opposite. A zero-cost collar may be used for options, stocks, interest rates, or commodities. See also: Collar.


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An example of a commonly used hedging/monetization strategy involves a taxpayer borrowing against the value of shares currently owned, and entering into a zero cost collar with respect to such shares.
On September 19, 2008 we terminated a zero cost collar for oil volumes of 1,000 barrels per day for the full year 2011.
The reference price for the zero cost collar is NYMEX West Texas Intermediate crude oil.
 
 
 
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