Practice Quiz 5 — Options Strategies & Payoffs

You hold 100 shares of a stock currently at $50. You are worried about a decline but don’t want to sell. You buy a put with strike $45 for $2 and sell a call with strike $55 for $2. (This is a collar.)

(a) What is the net upfront cost of the options (per share)?

(b) Compute your total portfolio value per share (stock + options) at expiration if the stock ends at: (i) $40, (ii) $50, (iii) $60.

(c) In one sentence, what is the trade-off you are making by putting on this collar instead of just holding the stock?

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MGMT 298 — UCLA Anderson School of Management — Spring 2026

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