Welch takes this further: “properly constructed and documented, a variable pre-paid forward does not constitute a constructive sale and is not subject to margin lending restrictions.” A variable forward contract can be viewed as an “unbalanced collar,” a collar where the investor does not have the same num- ber of calls and puts. (V2, p. 282). Is the variable forward the same as variable pre-paid forward? =========================================== Collar List: variable forward contract Variable prepaid forward “unbalanced collar” monetized collar(?) income-producing collar (sale of the call exceeds the cost of the put) cashless collar=zero-cost collar=Zero-premium collar equity collar interest rate collar
Wikipaedia: A Prepaid Variable Forward contract (PVF) is an investment strategy that allows an investor with a concentrated stock holding to generate liquidity for diversification or other purposes. Additionally, the investor will receive cash in hand without paying the capital gains taxes that would apply to a security disposal. The PVF allows the investor to receive an up-front payment (typically, 75-85% market value) in exchange for delivery of a variable amount of shares or cash in the future. Since the contract establishes floor and threshold prices that govern how many shares (or cash equivalent) are returned at a given market price, the investor will be protected against downside risk below the floor while enjoying appreciation potential up to the threshold