An inquiry from a market participant to one or more liquidity providers seeking executable price quotes for an Ethereum (ETH) collar options strategy. This strategy combines buying a put option and selling a call option, alongside owning the underlying ETH, to define a specific price range for the asset.
Mechanism
An ETH collar quote request specifies the underlying asset as Ethereum, the quantity of ETH to be protected, the desired strike prices for the long put and short call options, and the expiration date. Institutional RFQ platforms broadcast this request to multiple dealers. Each dealer responds with a two-sided price for the complete collar structure, accounting for the premiums of both options and any associated hedging costs. The request implicitly assumes ownership of the underlying ETH.
Methodology
The strategic objective of an ETH collar is risk mitigation, specifically to limit potential losses on an ETH holding while also capping potential gains within a predetermined range. This provides downside protection against significant price drops while generating income from the sold call option to offset the put’s cost. The request mechanism ensures competitive pricing for implementing this structured hedging position.
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