Can some1 please explain the logic behind the calls and puts in creating a collar on exchange rates with different options. i.e. creating a collar on ARS is buy a put (floor) and sell a call (cap). What is the equivilant on CAD if we think about CAD/ARS and why?..
actually i think i got it.
If we sell a call on ARS we are selling the option to sell ARS and buy CAD. If we sell the option to buy CAD we are selling a put on CAD. Therefore sell a call on ARS = sell a put on CAD.
If we buy a put on ARS we are buying the option to sell ARS and buy CAD. If we buying the option to buy CAD then we are buying a call on CAD. Therefore: buy put on ARS = buy CAD on Call
is the above correct and is there an obvious formula to remember this?.. THANKS!!