Modules for Traders
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A summary of the collar and the calendar spread
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Check out this video for a summary of the collar and the calendar spread.
Let’s first take up the collar. This strategy is generally used by traders to hedge short-term downside risks on a stock that they already own. In addition to limiting the losses, the collar options strategy also limits your profits. To set up a collar trading strategy, you first need to own the shares of a company with an active derivatives segment. The next step is to sell an out of the money (OTM) call option contract of the stock. And finally, you need to buy an out of the money (OTM) put option contract of the same stock. Up next, we have the calendar spread. This is a versatile trading strategy that can be used in bullish, bearish, and neutral market conditions. There are three types of calendar spreads, namely the bull calendar spread, the bear calendar spread and the neutral calendar spread. To set up a calendar spread, you need to sell an options contract of an asset with a shorter expiration date And purchase the same options contract with the same strike price, but with a longer expiration date. So, that wraps up the collar and the calendar spreads. Up next, we have the iron condor and the butterfly spread. Curious to know the details? Head to the next chapter to learn more.