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Premium-Neutral Option


A zero net premium option in which the premium is paid with the premium received from the sale of another option. An example is a zero-cost collar. It is an option that involves multiple positions whose overall premium is zero.

This option is also known as a no-cost option, a premium-free option, or a zero-premium option.



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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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