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.

zero-cost collar

The investment position of being short a call option and long a put option for stock already owned. The premium received from selling the call option is used to pay for purchase of the put. The collar is designed to protect an investor against a decline in the price of the stock without the investor being required to sell the stock and pay a tax on capital gains.
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The most common derivative instruments used by insiders are: 1) prepaid variable forwards (forwards), 2) zero-cost collars (collars), 3) exchange funds, and 4) equity swaps.
Zero-Cost Collars (Collars) and Prepaid Variable Forward Contracts (Forwards)
By using a zero-cost collar, investors who do not need diversification can be protected against up-and-down market movement.
In February 2006, Celadon's Chairman and CEO, Steve Russell, entered into a two-year, zero-cost collar arrangement.
Capstone") (TSX: CS) today announced that it has entered into zero-cost collars for 36,000 tonnes of copper production between now and September 30, 2015 (with pricing periods from June 2015 to February 2016) at a minimum of US$2.
Berry Petroleum Company (NYSE:BRY) has entered into zero-cost collars for approximately 10,000 barrels of oil per day for the period January 1, 2006 through December 31, 2009.
Primarily due to this significant price movement, the Company has hedged approximately one third of its crude oil production for the next 12 months using zero-cost collars to lock-in attractive profitability on those barrels and partially protect the Company from a near-term price decline.