Protective Collar Strategy

Version: 1.0 Last Updated: 2025-12-12

Overview

A protective collar combines stock ownership with options to create a defined-risk position. By purchasing a protective put (downside insurance) and selling a covered call (upside income), the strategy limits both loss and gain while typically reducing or eliminating the net cost of protection.

Quick Summary: Own stock + Buy OTM put + Sell OTM call = Protected position with capped upside

Strategy Characteristics

Position Structure:

• Own 100 shares of stock (or multiples)
• Buy 1 OTM put (downside protection)
• Sell 1 OTM call (income generation)
• Same expiration date for options