This product tends to be used primarily by financial institutions. In the case of non-financial clientele, it is used to decrease the costs for purchasing a Cap.
If the client has purchased a Cap, the costs for purchasing it may be decreased by the sale of a Floor. In this case, the client has security for their obligations drawing variable interest towards a rise in interest rates, however in the event of their decline, they will profit only to a certain degree, because the minimum amount of interest costs is given by a Floor limit rate. This entails the security of a Collar-type option strategy. If the amount of the paid commission for the Cap is equal to the received commission for the Floor, this is what is known as a Zero Cost strategy.