Long Collar – Free Trade Idea
Every Friday we give you a free options trade idea identified by Option Party. Today, we’re focusing on the long collar.
There is an attractive long collar trade in AXOVANT SCIENCES LTD (AXON). Currently it is trading for $19.54.
There is a 61.7% chance the stock will close above 12.50 on 10-20-2017, and you will earn your target return of $1,287.45. There is a 64.1% chance the stock will close above 11.06 on 10-20-2017, and you will earn a profit. There is a 34.3% chance the stock will close below 10.00 on 10-20-2017, and you will have a total loss of $967.55.
For a Long Collar, the amount you risk is different than the amount of capital required. This is because you cannot lose all the capital invested in the position (this is a good thing). This long collar will require $9,957.60 and returns 12.9% on the capital invested.
This is a three legged strategy. To enter this position you will sell 9 call options expiring on 10-20-2017 with a 12.50 strike price, buy 9 put options expiring on 10-20-2017 with a 10.00 strike price and buy 900 shares of stock for 19.58. This will require a net debit of $11.04. The commission for this trade will be $21.60.
All information presented here is current as of August, 25 2017 10:33 am (EST). All trading involves risk. Free trades ideas are presented for illustrative purposes only and are not to be construed as financial advice.
How Did We Do? The Results…
This trade employed a Long Collar strategy that needed AXON to close above $11.06 on October 20, 2017 to earn a profit. The stock closed at $5.68 and resulted in a loss of $967.55.