A few people have been asking how this worked:<p>He bought put options (his right to sell at a particular price) below the market price and sold call options (a counterparty&#x27;s right to buy at a particular price) above the market price.<p>If you price them right you can use the money from selling the call options to buy the put options which makes it costless in net cash terms.<p>Market price was: $95
Put: $85
Call: $205<p>The reason the spread between the two is so high has to do with the time value of money and some other technical stuff, but those were the collar values.<p>Yahoo&#x27;s stock went up to the $230s which was above the call option price, if the options had been exercised at that time, Mark Cuban would have lost out on the gain in price above the cap ($205). By the time they were exercised however, the stock was totally in the toilet and Mark Cuban was able to sell at $85.<p>It&#x27;s not really an unusual deal but not many people were doing that in 1999, collar trades are much more common now because people remember the first crash.