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Collar

Definition: [crh] Refers to the ceiling and floor of the price fluctuation of an underlying asset. A collar is usually set up with optioDefinition: ns, swaps, or by other agreements. In corporate finance, the collar strategy of buying puts and selling calls is often used to mitigate the risk of a concentrated positDefinition: ion in (sometimes) restricted stock. When the restricted owner can't sell the stock, but needs to diversify the risk, a collar transaction is one of the few tools available. Many corporate exeDefinition: cutives who receive chunks of their compensation in restricted stock need to employ this strategy to mitigate the diversification risk in their overall portfolio.

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