The Collar: Removing All of the Risk

Michael C. Thomsett

Chapter Chapter 5 in Options for Risk-Free Portfolios, 2013, pp 107-134 from Palgrave Macmillan

Abstract: Abstract Do you need to diversify your portfolio? Traditional wisdom tells you that diversification is essential in order to manage risk. However, the collar could contradict this traditional “rule” of investing. If you focus on ownership of shares in a company yielding exceptionally high dividends, would you place all of your capital in shares of that company? You might, except for the need for diversification. This chapter challenges this rule and demonstrates why you might not need to spread money around at all, and that it could be more profitable to put all of your eggs in one basket and then set up an ironclad protective strategy so that market risk is eliminated completely.

Keywords: Stock Price; Market Risk; Dividend Yield; Downside Risk; Price Decline (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-32226-5_6

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DOI: 10.1057/9781137322265_6

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