Collar Option Strategy

$25,00

Covered Call and Protective Put strategy is combined to form Collar strategy. This strategy limits both gains and losses. It is created by holding an underlying stock, long OTM put option, and short OTM call option. The protective put protects from the downside and selling calls will be used to pay for the protective put.

The payoff from Collar strategy = Stock Payoff + Put Payoff + Call Payoff

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Covered Call and Protective Put strategy is combined to form Collar strategy. This strategy limits both gains and losses. It is created by holding an underlying stock, long OTM put option, and short OTM call option. The protective put protects from the downside and selling calls will be used to pay for the protective put.

The payoff from Collar strategy = Stock Payoff + Put Payoff + Call Payoff