thumbnail image
broken image
broken image
  • Home |
  • Align |
  • Design |
  • Execute |
  • Markets |
  • Learn|
  • Portfolios |
  • Careers |
  • AI |
  • Download |
  • About Us
  • …  
    • Home |
    • Align |
    • Design |
    • Execute |
    • Markets |
    • Learn|
    • Portfolios |
    • Careers |
    • AI |
    • Download |
    • About Us
    • Login
Powered by VQ
broken image
broken image
  • Home |
  • Align |
  • Design |
  • Execute |
  • Markets |
  • Learn|
  • Portfolios |
  • Careers |
  • AI |
  • Download |
  • About Us
  • …  
    • Home |
    • Align |
    • Design |
    • Execute |
    • Markets |
    • Learn|
    • Portfolios |
    • Careers |
    • AI |
    • Download |
    • About Us
    • Login
Powered by VQ
broken image
Go Back
Option Strategy - Collar

Option Strategy - Collar

Buying the put gives you the right to sell the stock at strike price A. Because you’ve also sold the call, you’ll be obligated to sell the stock at strike price B if the option is assigned.

You can think of a collar as simultaneously running a protective put and a covered call. Some investors think this is a sexy trade because the covered call helps to pay for the protective put. So you’ve limited the downside on the stock for less than it would cost to buy a put alone, but there’s a tradeoff.
More Details

Many investors will run a collar when they’ve seen a nice run-up on the stock price, and they want to protect their unrealized profits against a downturn.

Some investors will try to sell the call with enough premium to pay for the put entirely. If established for net-zero cost, it is often referred to as a “zero-cost collar.” It may even be established for a net credit, if the call with strike price B is worth more than the put with strike price A.

Some investors will establish this strategy in a single trade. For every 100 shares they buy, they’ll sell one out-of-the-money call contract and buy one out-of-the-money put contract. This limits your downside risk instantly, but of course, it also limits your upside.

  • Intelligent

    Investing

    Simplified.

    Intelligent Portfolios

VersaQuant © 2023

Terms & Conditions
Privacy Policy
    Cookie Use
    We use cookies to ensure a smooth browsing experience. By continuing we assume you accept the use of cookies.
    Learn More