When Should You Use This Strategy?

Own stock; want low-cost protection in range

Who Benefits Most?

Long-term holders seeking hedges

Position Setup

The Collar consists of the following legs:

  • Buy 100shares
  • Buy 190 strike put at $2 premium
  • Sell 1110 strike call at $2 premium

How Profit and Loss Work

Maximum Profit: Capped: (Call strike − Stock entry) + (Call premium − Put cost)

Maximum Loss: Limited: (Stock entry − Put strike) − Net cost

Break-even Points: Stock entry − (Put − Call premium)

Timing & Time Horizon

30–90 days (often rolled)

Most traders enter this strategy 30–60 days before their expected move, allowing enough time for the position to develop while avoiding excessive time decay on shorter-dated options.

Capital Requirements

100+ shares; low/zero net cost

How to Manage the Position

Roll quarterly; accept assignment if over call

  • Monitor the position daily, especially as it approaches profitability
  • Set clear profit targets and exit rules before entering
  • Consider closing early to lock in gains rather than waiting for max profit
  • Be prepared to cut losses if the thesis is wrong

Key Risks & What to Watch

  • Upside capped at call strike
  • Opportunity cost if rallies past cap

Model Before You Trade

Every strategy performs differently based on entry price, strike selection, and premium levels. Use the interactive Collar calculator to model the payoff with your expected entry, strikes, and premiums before committing capital.

Educational information only. This guide explains how the strategy works mathematically and typically behaves. It is not investment advice, and past performance does not guarantee future results. Options trading involves significant risk, including the potential loss of premium paid. Paper trade or use small positions while learning.