NEW YORK ( TheStreet) -- The curiously named Collar Fund (COLLX), which was started last June, follows a unique strategy among stock mutual funds. And its volatility resembles that of a bond exchange traded fund."Collar" may ring a bell, as it's named for an options strategy. A collar consists of buying a stock, selling a call option and using the proceeds from the call sale to buy a put option. The Collar Fund targets call options at about 10% out of the money and put options at about 10% out of the money, dramatically reducing volatility. The fund is managed by Summit Portfolio Advisors, a firm that has followed such a strategy for separate accounts for several years. The fund ought to have a high correlation to the stock market but with a fraction of the volatility.
Mutual Fund 'Collars' Losses, Limits Gains
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