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Range forward contract

A strategy that involves purchasing an out-of-the-money call option while simultaneously selling an out-of-the-money put option (long collar), or purchasing an out-of-the-money put option and selling an out-of-the-money call option (short collar), with the same expiration date and the same underlying, in exchange for a reduced premium equal to the difference between the premiums on the two options.

Synonyms and variations

  • Collar 1.
  • Cylinder
  • Fence
  • Range forward
  • Risk reversal
  • Tunnel