A hedge where the hedger buys a put and sells a call to hedge being long the underlying asset. The result is that the hedger knows that an exchange rate within a particular range will be achieved. e.g. a German corporate which is long $ (i.e. will receive $) would buy a $ call and sell a $ put with different strikes to create a range forward. It is primarily used to reduce the up-front cost of a vanilla option. If it is structured so that the call and put premiums are the same it is called ‘Zero Cost’. Also called a Cylinder or a Collar.
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