Collar Strategy Calculator
Stock with a protective put underneath and a covered call paying for it.
Own the stock, buy a put for a floor, sell a call to pay for it. Both ends capped.
Figures are per position at expiration and include the 1 contract entered, at 100 shares each. They exclude commissions, assignment fees, and any early-assignment or dividend risk on short legs. Values before expiration differ, because time value and implied volatility still carry weight.
A collar is stock you already own, plus a put that sets a floor under it, plus a call sold above it to pay for that put. It converts an open-ended position into one with a known worst case and a known best case, which is why it is the standard tool for someone holding a large concentrated position they cannot or will not sell.
Worked example. Stock bought at $100, a 95 put for $2.00, a 110 call sold for $1.50. Net cost is $50 on top of the shares. Below $95 the put takes over, capping the loss at $550. Above $110 the shares are called away for a maximum profit of $950. Break-even is $100.50, the stock price plus the net premium paid.
Frequently asked questions
What is a zero-cost collar?
One where the call premium exactly funds the put, so the protection costs nothing out of pocket. The cost has not vanished, it has moved: you accept a lower ceiling. Move the call strike closer to the money and it pays for more put.
When would I use a collar?
Holding a large position you do not want to sell, often for tax reasons or because it is employer stock, and wanting to survive a drawdown. It is also common ahead of a known event, where you want to stay invested but not carry the full downside.
What are the tax considerations?
Collars can trigger the constructive sale and straddle rules in the US, which may suspend your holding period or defer losses. This is one of the strategies where a conversation with a tax advisor before entering genuinely matters, particularly on a low-basis position.
What is the real cost?
The upside above the call strike, which you have sold. In a strong rally that can be far more than the premium you saved, and unlike the put, that cost only becomes visible in hindsight.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.