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Technology Stocks : WDC/Sandisk Corporation
WDC 160.00-2.2%3:59 PM EST
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To: Binx Bolling who wrote (19246)2/21/2001 6:12:25 PM
From: Road Walker  Read Replies (1) of 60323
 
Binx,

A collar can be executed by any stock holder. Simply buy puts at the current stock price, sell calls at the next higher stock price. You pay the difference in the options price. If the stock goes up past the call strike, you lose the stock and get the appreciation to the next higher price, plus the option premium, minus the cost of the put. If the stock goes down, you have a flat trade on the puts & stock, keep the premium on the calls. If the stock goes up A LOT, you are stuck selling below market. If the stock stays the same, you lose the difference between the cost of the puts v. the income from the calls.

Wish I had done a few collars over the last six months.

John
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