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The Collar: Removing All of the Risk

In: Options for Risk-Free Portfolios

Author

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  • Michael C. Thomsett

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.

Suggested Citation

  • Michael C. Thomsett, 2013. "The Collar: Removing All of the Risk," Palgrave Macmillan Books, in: Options for Risk-Free Portfolios, chapter 0, pages 107-134, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-32226-5_6
    DOI: 10.1057/9781137322265_6
    as

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