Is a Net-Credit Collar Generally Preferred over a Zero-Cost Collar?
A net-credit collar is often preferred because it immediately generates income for the investor, reducing the effective cost basis of the underlying asset. While it typically involves a slightly tighter cap on the upside profit than a zero-cost collar, the immediate cash inflow and lower breakeven point are often seen as a favorable trade-off for a conservative investor.
Glossar
Net Credit
Balance ⎊ This metric represents the final positive difference between total inflows and total outflows across a series of transactions or over a defined accounting period within a trading strategy.
Net Credit Impact
Valuation ⎊ Net Credit Impact, within cryptocurrency derivatives and options trading, represents the aggregate premium received less potential obligation fulfillment costs associated with a specific position or strategy.
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.