A collar protects a stock position by buying a put and financing it with a covered call. It caps both downside and upside — low-cost insurance for gains you want to keep.
Open the Collar calculator →Use a collar to protect gains on a stock you own without selling it. You buy a protective put to set a floor and sell a covered call to pay for that put, bracketing your position between the two strikes.
It is ideal after a big run-up, when you want to lock in most of the gain through an uncertain period but stay invested for tax or conviction reasons.
The put guarantees a floor; the call caps your upside and finances the protection — often making the collar cost little or nothing to put on (a "zero-cost collar").
The cost is opportunity: if the stock keeps rallying past the call strike, your shares are called away and you miss the rest. You are trading some upside for downside certainty.
Use the free OptionProfit Collar calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.
Often very little — the premium from the call you sell pays for the put you buy, which is why "zero-cost collars" are common.
Your shares are called away at the call strike, so you keep the gain up to that level but miss any move beyond it.
When you have a meaningful unrealised gain you want to protect through an uncertain period without selling the shares outright.
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