Payoff of bull spread vs zero cost collar bull

cfalevel2011

They are the same right?

dyga

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

ll11

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

Darien

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.

cityboy

maisatomai Wrote:
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> Thanks. The shape is the same right?

Yes it will be the same.

zwjy

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

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.

bboo

they are the same. no difference

mcmc

The payoffs are the same.

pennyless

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