How Does a “Zero-Cost Collar” Strategy Work?
A zero-cost collar is a specific implementation of the collar strategy where the premium received from selling the call option is exactly equal to the premium paid for buying the protective put option. This results in a net premium of zero, meaning the hedge is established with no upfront cost.
The trader foregoes all upside above the call strike for free downside protection below the put strike.
Glossar
Collar
Framework ⎊ Options collars, within cryptocurrency derivatives and financial engineering, represent a neutral strategy constructed from a protective put and a covered call, designed to limit both potential gains and losses around a specific underlying asset price.
Collar Strategy
Containment ⎊ : This strategy establishes a defined floor and ceiling for the valuation of an underlying crypto asset position.