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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At November 30, 2014, our outstanding fuel derivatives consisted of zero cost collars on Brent crude oil ("Brent") to cover a portion of our estimated fuel consumption as follows:
b) We will not realize any economic gain or loss upon the monthly maturities of our zero cost collars unless the average monthly price of Brent is above the ceiling price or below the floor price.
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.
18 /PRNewswire-FirstCall/ -- Goodrich Petroleum Corporation today announced that it has recently added to its existing hedge position by executing zero cost collars on 30,000 Mmbtu per day for the period including all of calendar years 2010, 2011, and 2012.
Similar to the synfuels hedge Sasol also entered into zero cost collars for 550 000 barrels of oil for its Sasol Petroleum International's West African crude oil output (representing about 30% of planned net output for financial year 2009).
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
The zero cost collar model allows users to compute the call strike for which the call premium offsets the put premium.
The zero cost collar structure is similar to the oil price hedging concluded for the 2007 financial year, when a floor price of USD63,00 per barrel was achieved and upside was limited to USD83,60 per barrel, also on 45 000 barrels of oil per day.
The zero cost collar structure is similar to the oil price hedging concluded for the 2006 financial year when a floor price of US$45 per barrel was achieved and upside was limited to US$83 per barrel, also on 45 000 barrels of oil per day.