suyash1989

Thanks guys, great explanation.

If she sees a short term rise in the variable rate - is collar the best way to maximize the gains? If so, then let's say the rates:

Went up: the long cap would offer downside protection and writing a floor would offset a part of that cost.

Went down: benefit from a low rate albeit only up to the floor minus the floor premium (received earlier for writing the floor). Anything below this point will be her LOSS.

Does this sound right?