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Derivatives




Hedge Wrapper


An option strategy where an investor who owns (or takes a long position in) an underlying security buys an out of the money put and simultaneously sells an out of the money call on the same security. The hedge wrapper places a limit on the payoff (losses as well as gains) of an option. So whatever direction the security takes, the investor would be assured of a certain range of price in which the security will ultimately be sold at expiration date.

The hedge wrapper is also known as a collar.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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