A Convertible Asset Substitution Option Transaction, or ASCOT, is a way of separating the fixed income and equity components from a convertible bond.
ASCOT is built by selling an American call option on the convertible bond issuer’s shares at an exercise price that takes into account the cost of unwinding the strategy.
ASCOTs allow investors to eliminate credit risk on convertibles and provide opportunities for convertible arbitrage strategies.
A collar is an options strategy that involves buying a put option down and selling a put option up, which is used to protect against large losses but also cap large profits up.