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A collar is created by: [3] buying the underlying asset; buying a put option at strike price, X (called the floor) selling a call option at strike price, X + a (called the cap). These latter two are a short risk reversal position. So: Underlying − risk reversal = Collar. The premium income from selling the call reduces the cost of purchasing ...
The condor is so named because of its payoff diagram's perceived resemblance to a large bird such as a condor. [ 6 ] An iron condor is a strategy which replicates the payoff of a short condor, but with a different combination of options.
An example of a cap would be an agreement to receive a payment for each month the LIBOR rate exceeds 2.5%. Similarly, an interest rate floor is a derivative contract in which the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price.
For example, a 40-50 January 2010 box consists of: Long a January 2010 40-strike call; Short a January 2010 50-strike call; Long a January 2010 50-strike put; Short a January 2010 40-strike put; A box spread position has a constant payoff at exercise equal to the difference in strike values. Thus, the 40-50 box example above is worth 10 at ...
For example, a bull spread constructed from calls (e.g., long a 50 call, short a 60 call) combined with a bear spread constructed from puts (e.g., long a 60 put, short a 50 put) has a constant payoff of the difference in exercise prices (e.g. 10) assuming that the underlying stock does not go ex-dividend before the expiration of the options.
If you were to pay 7.44 percent, for example, on $200,000 over 15 years, it’d cost you $132,530 in interest. At 7.12 percent, you’d pay roughly $6,500 less. Pros and cons of a no-closing-cost ...
In this example, you’d pay exactly $3,000 total with the 0% intro APR card, whereas with a traditional credit card charging 20% APR, you'd pay about $415 in interest if you took 15 months to pay ...
An iron butterfly recreates the payoff diagram of a butterfly, but with a combination of two calls and two puts. The option strategy where the middle options (the body) have different strike prices is known as a Condor .