A Collar with a Net Outlay of Approximately Zero Is

question 3

Multiple Choice

A collar with a net outlay of approximately zero is an options strategy that

• A)combines a put and a call to lock in a price range for a security.
• B)uses the gains from sale of a call to purchase a put.
• C)uses the gains from sale of a put to purchase a call.
• D)combines a put and a call to lock in a price range for a security and uses the gains from sale of a call to purchase a put.

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Definitions:

Dollar Return

The total gain or loss on an investment expressed in monetary terms, considering both capital gains and dividends or interest.

Shares

Portions of ownership in a corporation or financial entity, shares guarantee an equal share in dividend payouts, contingent on profit declarations.

Dividend

A share of a company's profits distributed to its shareholders, often expressed as a dollar amount per share.

Stock Prices

The market value of a company's shares, determined by supply and demand dynamics.