Series 7 practice questionmediumOptions — Collar Strategy
An investor owns 100 shares of XYZ at $50, buys 1 XYZ 45 put at $2, and writes 1 XYZ 55 call at $2. This strategy is known as a:
- AStraddle
- BStrangle
- CCollar✓ Correct answer
- DButterfly spread
Explanation
Why C — Collar
A collar combines a long stock position with a protective put and a covered call. The put provides downside protection (floor at $45), while the covered call generates premium to offset the put cost. In this case, the collar is established at zero cost since the premiums are equal ($2 each).
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 755+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Information & Recommendations questions
- An investor owns 100 shares of DEF at $80, buys 1 DEF 75 put at $3, and writes 1 DEF 85 call at $3. What is the maximum…
- When an option holder exercises the option, the OCC assigns the exercise notice to:
- An investor buys 1 ABC Aug 40 put at $2 and buys 1 ABC Aug 50 call at $3 (long strangle). What are the breakeven points?
- Broad-based index options such as the S&P 500 Index (SPX) use which exercise style?