*I loved the example you gave on*-- M.L. The above-mentioned

**Research in Motion**(RIMM) with the minuscule downside and much better upside. I always try to find those types of collar situations where I can tell a client the worst-case scenario with a nice upside. A lot of times I try to sell half the position size in calls while fully protecting the downside. I use the proceeds from the call sale to cover as much of the put cost as I can. Based on volatility, it seems like there are much better candidates for such strategies. Is there an easy way to find attractive names to use with this strategy? Thanks in advance,Going back to the original example, which was based on XYZ trading at $100, with an implied volatility of 50%, the table below compares the theoretical call strike prices that would equal the value of $100, or an at-the-money put option across one- and two-year time periods, and 2% and 4% short-term (one-year borrowing cost) interest rates.

As you can see, if the annualized cost to borrow money moved from 2% to 4% and the life span of the position was two years, you could sell a call with a $120 strike price for the same price as the cost of buying a put with the same expiration and a $100 strike price. This would mean you'd created a position that removed all downside risk and yet offered a potential upside of 20%.

While these numbers are theoretical and don't yet reflect current yields, they illustrate a useful strategy for options investors to use if we move to a higher interest rate environment. Owning a stock that has no downside risk, but a 20% profit potential over a two-year period, certainly seems like a legitimate alternative to parking money in a two-year note that earns 5%, or even 8%. But this carries the short-term risk of loss of principal, should rates rise and you need to sell the bond before maturity.

The Highest Call Strike that Equals Cost of At-the-Money Put | |||

Expiration Period | 2% Interest Rate | 4% Interest Rate | |

One Year LEAP | 107 | 110 | |

Two Year LEAP | 114 | 120 | |

Source: TSC Research |