A bear spread is a bear option strategy used when an investor expects a moderate decline in the price of the underlying asset.
There are two types of bearish spreads that a trader can initiate: bearish put spread and bearish call spread.
The strategy involves the simultaneous purchase and sale of put or call options on the same underlying contract with the same expiration date but different strike prices.
Bearish spreads maximize profits if the underlying closes at or below a lower strike price.
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.
A full ratchet is an anti-dilution provision that applies the lowest selling price as the option’s adjusted price or conversion rate to existing shareholders.
The interest rate collector uses option contracts to hedge interest rate risk to protect floating rate borrowers from rate hikes or lenders from falling rates in the event of a reverse collar.
A long straddle is an option strategy that involves buying both a long call and a long put on the same underlying asset with the same expiration date and strike price.
The option-adjusted spread (OAS) measures the difference in yield between a bond with an embedded option, such as an MBS or callable, and the yield on a Treasury bond.