Zero Cost Collar

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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63 per pound with periods of maturity to September 2018, zero cost collar unmargined sales contracts for 120,000 tonnes at a spread of $2.
The company will enter into a fence structure - zero cost collar - for around 300,000 gold ounces, representing around 20% of Burnstone's production during the loan term, with lenders to provide a cost effective hedging structure required by the facilities.
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.