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Algo Trading

Algo Strategy : Costless Collar

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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 

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