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Collar
Own shares, buy a protective put, sell a covered call. Limits both upside and downside.
What is a Collar?
You own 100 shares, buy an OTM put as downside protection, and sell an OTM call to finance the put. The result: your gains are capped at the call strike and your losses are capped at the put strike. Often done for near-zero net cost (the put and call cancel out in premium).
When to use it
Use when you want to protect a stock position against a major drop but aren't ready to sell. Common for concentrated positions, pre-liquidity events, or volatile markets. Often used by executives to hedge stock grants.
Structure
Own 100 shares + buy 1 OTM put + sell 1 OTM call, same expiration.
Key Metrics
Max Profit
(Short call strike − stock price + premium credit) × 100.
Max Loss
(Stock price − long put strike − premium credit) × 100.
Breakeven
Stock purchase price + net premium paid (or − credit received).
Greeks Profile
Delta: reduced vs. stock alone. Theta: typically near zero. Vega: mixed.
Tips & Best Practices
- 1Try to enter for a credit or zero cost — the call premium should cover the put.
- 2Choose the put strike at your maximum acceptable loss.
- 3Choose the call strike at a price you'd be happy selling shares.
- 4Useful for tax reasons — delays a taxable sale while still protecting gains.
See it in action
Model a Collar with a real ticker. See the P&L chart, heatmap, and exact breakevens.
Open Collar Calculator →