About this question
Easy · Options & Greeks · Quant Trader interview question · options, collar, risk-management, profit-loss
You own 100 shares of a stock currently trading at 100 dollars. To protect against a potential downturn, you implement a collar strategy: You buy a put option with a strike price of 95 dollars and simultaneously sell a call option with a strike price of 105 dollars. Assume the net premium received (premium received from selling the call minus premium paid for buying the put) is 2 dollars. What are the maximum possible loss and maximum possible gain for this strategy? Consider only the price move