zero cost collar

[iossif]

Guys,
I keep bumping into weird answers in the CFAI exams…
Zero cost collar = short OTM call + long OTM
Risk reversal = short OTM put + long OTM call
Agree?
Then why does Question 7 from the 2010 CFAI essay exam state the following?
“A zero cost collar would lose a limited amount of money if the U.K. loses the bid, and
would make only a limited profit (compared to a straddle) if the U.K. wins the bid.”

 

[tjcfa]

There is protection on the downside but limited profit on the upside: the rule of the collar.

 

[iossif]

So I need to always assume that I’m long the stock… I get it