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8 A portfolio manager fears that his FANG stock could drop 10%; however, he would...

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8 A portfolio manager fears that his FANG stock could drop 10%; however, he would like to stay invested to save on transactions costs. He has decided that he is willing to take a 5% loss (1140) and give up gains over 5% (1260) in a collar to prevent a 10% loss. He is long 10 lots with a price of $1200. Each option contract is equal to one lot (100 shares). Set up a collar for the position. The options panel for the stock - $105 $95 $20 $30 $40 August 1120 Calls August 1140 Calls August 1160 Calls August 1200 Calls August 1240 Calls August 1260 Calls $85 $65 August 1120 Puts August 1140 Puts August 1160 Puts August 1200 Puts August 1240 Puts August 1260 Puts $60 $45 $35 $80 $90 a. What is the net value of just the collar when you set it up? Is this an outflow or an inflow of cash? b. What is the profit or loss on the collar if the stock is 1100 ? 1300? c. What is your max and min value of your entire portfolio considering the collar? MAX

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