A collar position is, economically, intermediate between pure equity and fixed-income exposure.
Can someone pls explain this…
Magician pls help…
The payoff on a collar looks like this: _/¯.
If the strikes on the long put and the short call get farther apart, the diagonal gets longer, and the payoff approaches this: /.
That’s the payoff on pure equity.
If the strikes on the long put and the short call get closer together, the diagonal gets shorter, and the payoff approaches this: —.
That’s the payoff on a risk-free investment (i.e., fixed-income).
Thank u so much yet again 