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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We recently increased our hedge position, primarily using zero cost collars in this period of high commodity prices, in order to establish an economic base for our future operations and to be able to participate in higher prices if that should occur.
These zero cost collars supplement existing swap and collars owned by the Company.
For option strategy trades, users can input a desired net premium and solve for one of the strikes, making pricing certain financial instruments such as zero cost collars much easier.
American and European Options - Barrier Options - Lookback Options - Zero Cost Collars - Digital Options - Quanto Options - Straddles, Strangles, and Spreads - Asian Options - Outperformance Options