A protective collar is a strategy where you own the underlying stock, and subsequently sell a covered call while simultaneously buying a protective put (also known as a married put).

A protective collar strategy is an options strategy that addresses market uncertainty. An option involves the right but not the obligation to buy or sell an asset at a specified price (strike ...

Determining whether you should use a protective put or collar to hedge your portfolio Schaeffer's Digital Content Team Dec 19, 2024 at 2:04 PM 2 hedging strategies for options traders ...

Reviewed by Samantha Silberstein In finance, the term "collar" usually refers to a risk management strategy called a protective collar involving options contracts, and not a part of your shirt ...

In this example, the protective collar gives you a maximum downside risk of 10% ($100 put option strike price/$110 current market value) and an upside potential of 27% ($140 call option strike ...

Here are some key considerations for using the collar strategy of put options and covered calls to safeguard your wealth in retirement.

You only need to pay out $0.30 extra ($30) per contract. That's cheap insurance for 100 shares! The real cost of implementing a protective collar is that you limit your upside.

With a collar, the premium you receive from selling the call helps to offset the price paid to buy the put. As a result, it's somewhat less expensive to hedge with a collar than a solo protective put.

At that point in the trading day, you could create a collar with a June 90 call (sold for 1.25) and a June 87.50 put (costing you 1.57). The net cost of this collar is $22 plus trading fees.

The easiest way to employ the collar options strategy is to buy a mutual fund. The Collar Fund, whose ticker is COLLX, and the Gateway Fund, whose ticker is GATEX, are good candidates.

With a collar, the premium you receive from selling the call helps to offset the price paid to buy the put. As a result, it's somewhat less expensive to hedge with a collar than a solo protective put.