Collar Strategy Calculator
Collar Strategy Calculator
Analyze the risk and reward of a protective collar options strategy. A collar combines owning stock with a Protective Put and a Covered Call to limit both downside risk and upside potential, often for little or no net cost.
Collar Details
Results
INSTRUCTIONS
How to Use This Calculator
1. Enter Stock Position
Input the current stock price and the number of shares you own. The collar strategy requires owning the underlying stock.
2. Set Protective Put
Enter the put strike price (below stock price) and the premium you pay for downside protection. This defines your floor.
3. Set Covered Call
Enter the call strike price (above stock price) and the premium received. The call premium helps offset the put cost.
4. Review Risk/Reward
Analyze the max profit, max loss, breakeven, and net cost. Adjust strikes to balance your desired protection versus upside.
EDUCATION
Understanding the Collar Strategy
A collar is a three-part options strategy consisting of owning the underlying stock, buying a protective put below the current price, and selling a covered call above the current price. The call premium received offsets some or all of the put cost, making this an efficient way to hedge a stock position. Collars are popular among long-term investors who want to protect gains while maintaining some upside potential.
The key formulas are: Max Profit = (Call Strike - Stock Price + Net Premium) x Shares, where Net Premium per Share = Call Premium - Put Premium. Max Loss = (Put Strike - Stock Price + Net Premium) x Shares. Breakeven = Stock Price - Net Premium per Share. When the call premium equals the put premium, the collar is called a "zero-cost collar" with no net premium outlay.
For example, if you own 100 shares at $100, buy a $95 put for $2.50, and sell a $110 call for $3.00, the net credit is $0.50 per share ($50 total). Your max profit is $1,050 if the stock reaches $110 or higher, and your max loss is limited to $450 if the stock falls to $95 or lower. The breakeven is $99.50. This defined risk profile makes collars attractive for protecting concentrated stock positions or locking in gains ahead of uncertain events.
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