Neutral strategy · Intermediate

Collar

Market outlook Protected range

Long shares with put floor and call ceiling.

Semi-ProMedium risk30–90 days (often rolled)

Greek profile

DeltaPositive
ThetaLong
VegaShort
GammaShort
RhoMedium

Net long delta from the stock, trimmed by the short call and long put. In a typical zero-cost setup the short call's theta and gamma dominate, giving small net positive theta and negative vega — the trade-off for the put's downside floor.

→ Read the full Greeks 101 guide

When to use it

You own the stock, want downside protection, but don't want to pay the full ongoing cost of a protective put on its own. It suits holders willing to give up some upside in exchange for largely or fully offsetting that cost with the premium from a short call.

Best for

Long-term holders — often with a large unrealized gain or a concentrated position — who want a defined floor and are comfortable capping the position's upside to get it near cost. It's a common structure around a single large holding rather than a diversified portfolio.

Capital needed

100+ shares; low/zero net cost

Management

Many collar holders roll both legs quarterly, closing the expiring put and call and opening a new pair further out in time to maintain continuous protection. If the stock finishes above the call strike, most holders accept assignment and let the shares be sold at that price, since it was the trade-off accepted when the collar was set up.

Maximum profit

$1,000 per default position

Maximum loss

$1,000 per default position

Break-even

$100

Key risks

Upside capped at call strike
Opportunity cost if rallies past cap

Default legs

Buy 100 stock position
Buy 1 90 put at 2 premium
Sell 1 110 call at 2 premium

Reading the result

The graph recalculates from the visible legs. Same-expiry positions show expiration payoff; mixed-expiry positions show a dated theoretical valuation with remaining time value. It is not a price forecast.

Maximum profit—

Maximum loss—

Reward / risk—

Break-even price—

Position analyticsEarliest-expiry P&L

Valuation curveCurrent spot

X: underlying price at valuation · Y: profit / lossPer complete position · standard 100× option multiplier

Current riskBlack–Scholes position Greeks · day 0

Dollar-scaled for each leg's quantity, multiplier, expiry, and IV. Theta is per day; vega and rho are per one percentage-point move.

Delta—

Gamma—

Theta / day—

Vega / IV pt—

Rho / rate pt—

Per-leg contribution
Leg	Delta	Theta/day	Vega

Strike configurations

Collar variations

Zero-cost collar

Mixed

Select the call and put strikes so the premium received from the call fully offsets the put's cost.

Key difference: No net premium outlay, but the exact width of the protected range is determined by where the strikes happen to line up.

Best for: Holders who want protection without paying cash out of pocket for it.

Wide collar

Mixed

Place both strikes further from the current price.

Key difference: More room for the stock to move in either direction before the floor or ceiling engages, but likely requires a net debit.

Best for: Holders who want light protection while retaining most of their upside potential.

Common questions

Collar FAQ

Why would I cap my upside to get downside protection?

Setup

Selling the call finances some or all of the protective put's cost, making the hedge cheaper or free — the trade-off is giving up gains above the call strike in exchange for a defined floor below the put strike.

How is a collar different from a protective put alone?

Comparisons

A protective put alone has a real, ongoing premium cost; a collar largely offsets that cost by selling a call, at the price of capping the upside a protective put alone would leave open.

What happens if my stock gets called away in a collar?

Setup

You sell your shares at the call strike, similar to a covered call, though you also still hold the protective put, which can typically be sold or allowed to expire at that point.

When do investors typically use a collar?

When to Use

Around concentrated stock positions — often after a large unrealized gain — where the holder wants downside protection without paying much cash, and is willing to cap further upside to get it.

Deep dive

Read the full Collar guide

Detailed explanations, management techniques, and real-world scenarios

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Scenario Lab

Test price, time, and IV

Explore how this position changes before expiration

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Quick reference

Strategy FAQ

Quick answers about when to use, capital needed, and key risks

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Profit and loss

Options profit calculator

Compare max profit, max loss and break-even across common strategies

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Custom calculator

Build a multi-leg options strategy

Combine calls, puts, stock, quantities and different expirations

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Risk sensitivity

Calculate options Greeks

Inspect Delta, Gamma, Theta, Vega and Rho

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Same market view

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Head-to-head

Collar vs Protective Put

Structure, cost, and breakeven differences compared side by side

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