Payoff of bull spread vs zero cost collar

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发表于 2011-7-11 19:14 | 只看该作者

Spreads cannot be structured as zero-cost (if amounts/notionals/number of contracts of options are equal)

bboo

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发表于 2011-7-11 19:14 | 只看该作者

they are the same. no difference

mcmc

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发表于 2011-7-11 19:14 | 只看该作者

The payoffs are the same.

cityboy

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发表于 2011-7-11 19:14 | 只看该作者

maisatomai Wrote:
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>

>
> Thanks. The shape is the same right?

Yes it will be the same.

zwjy

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发表于 2011-7-11 19:14 | 只看该作者

And for collar, we also own the underlying stock while for bull call spread, we only have the 2 calls (1 long 1 short), isn't it?

oneboy

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发表于 2011-7-11 19:14 | 只看该作者

st_laurent Wrote:
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> And for collar, we also own the underlying stock
> while for bull call spread, we only have the 2
> calls (1 long 1 short), isn't it?

Yes for collar we own the underlying stock, we short a call and long a put.

For bull call spread we long 1 call and short another call.

dyga

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发表于 2011-7-11 19:14 | 只看该作者

generally speaking, not. Do you mean "bull call spread"?

ll11

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发表于 2011-7-11 19:14 | 只看该作者

Collar .... "unlimited" downside and upside
Spread ... limited upside and downside

Darien

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发表于 2011-7-11 19:14 | 只看该作者

I think the difference is in when you would use them.

Bull spread, you think the stock is going to go up, but not that much (not above high call strike). The sold high call subsidizes the purchased low call.

Collar you just want to be protected from a drastic rise or fall of the stock, and want to buy 1 and sell the other to pay for it, giving up the upside.