2010 CFAI Options Question has wrong answer (Q7)

it says a zero cost collar would lose a limited amountof money and make limited amount of money compared to a straddle.


If you have a straddle you spent 95c and you benefit either way

With zero cost collar you have to buy the call and sell more than 1 put (call is more expensive)

Theoretically you are short puts and can lose more than just limited $ The stock is at 8.8 and can go to zero. so you can lose 8.8 per share.

It also makes more than limited money (the collar that is) if you are right. Both the points are amiss in the answer guide.

the only reason why straddle is better than the collar is because of the uncertainty involved. If i was bullish, I would just do the collar.