Per the answers: “A collar option strategy is implemented by buying ATM put option and selling OTM call option.”
However, the CFAI material specifically says that collars are implemented with OTM options. Can anyone tell me if this is an error or am I missing something, please?
I think the essence of a collar option strategy is that you pay for a put option to limit losses and to cover the cost you write a call option. The intention of writing call options is important . From this perspective, OTM call options are more reasonable.
i remember that question. the options are not exactly ATM, but rather has like 10 cents difference in terms of strike price; so i guess it’s technically still a collar.