A Costless collar is an options strategy designed to protect a trader’s potential downside. It does this buying a protective put while writing an out-of-the-money covered call with a strike price at which the premium received is equal to the premium of the protective put purchased.
Strategy :
Long Shares Reliance Shares 1000
Sell 4 OTM Call
Buy 4 ATM Put
Note : Premium of Call = Premium of Put
Reliance Share Price : 2660 Quantity : 1000 Shares
SELL OTM Call Strike 2700 : Premium Received Rs. 60
BUY ATM PUT Strike 2660 : Premium Paid Rs. 60
Maximum Profit : (2700-2660 ) X 1000 ( Quantity of Shares ) = Rs. 40 X 1000 = Rs. 40000
Formula for Maximum Profit : Strike Price of Short Call – Purchase Price of Underlying – Commissions Paid
Maximum Profit : When Price of Underlying >= Strike Price of Short Call
Maximum Loss : Commission Paid
ALGO Strategy BULL CALL Spread : Algo Strategy : Bull Call Spread
NSE India Options Chain Website https://www.nseindia.com/option-chain