Bull Spread Put is an option strategy that is used when an investor expects a moderate increase in the price of the underlying asset.
An investor realizes a bullish put spread by buying a put option on a security and selling another put option on the same date but with a higher strike price.
The maximum loss is equal to the difference between the strike price and the net credit received.
The maximum profit is equal to the difference in premium cost of the two put options. This only happens if the share price closes above the higher strike price at expiration.
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.