An ETH Collar is an options strategy implemented on Ethereum (ETH) that strategically combines a long position in the underlying ETH with the simultaneous purchase of an out-of-the-money (OTM) put option and the sale of an out-of-the-money (OTM) call option, both typically sharing the same expiration date. This structure aims to define and limit potential losses while capping potential gains.
Mechanism
Architecturally, an ETH collar necessitates a portfolio management system capable of tracking three interconnected positions: the underlying ETH, the purchased put option, and the sold call option. The system must continuously monitor ETH’s spot price, real-time option premiums, and the Greek values to ensure the strategy remains within the desired risk-reward parameters, with the premium from the sold call often offsetting the cost of the bought put.
Methodology
The strategic objective of an ETH collar is capital preservation and downside protection for an existing ETH holding, particularly in uncertain or moderately bearish market conditions, while accepting a ceiling on potential upside profits. This methodology provides a predefined risk-reward profile, acting as an effective hedging mechanism to mitigate significant price drops, making it a conservative strategy for institutional crypto investors.
Unlock superior private equity returns with professional-grade execution strategies: master RFQ, options, and block trading for unparalleled market command.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
