Is an option that involves multiple positions whose overall premium is zero.
102.00 write a covered call at the profit objective collecting + 0.50
100.00 Long 1 futures contract
98.00 Purchase a put to objectively define risk – 0.50
In this example we’ve collected as much option time premium at our profit objective of 102.00 (+0.50) as we’ve paid out on the 98.00 put that objectively defines our risk on the trade and for the duration of the trading period (-0.50).
This strategy is also known as a collar, no-cost option, a premium-neutral, or a zero-premium.
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Peter Knight Advisor