A Collar provides protection against down side risk, as does a Protective Put.
The question is when the focus is on down side risk, when should I prefer one over the other ?
Your assistance will be appreciated.
A collar is cheaper.
To achieve that cheapness, you give up some upside gain.
Thank you.
More directly though, given the chance to down-side protect a position, which of the two would one choose: a protective put or a collar? See Reading 15, EOC, Question 11. I think a collar could also have been the answer?
The answer depends on how much you want to spend.
On a real exam question, they’ll make that clear.
Thank you. See Reading 15, Qu 11. Why the answer is A but NOT C is unclear to me.
My copy says that the answer is C.
My bad. I meant to say why is A incorrect. Sorry for the mix up
Hopewell wants to keep the potential upside; that’s why a collar is inappropriate.