• Collar   Collar

    A collar is executed against a stock position with the goal of limitied the potential downside without spending much in option premium.

    A collar begins by buying a protective put option and then sells a covered call in order to pay for the protective put. The entire collar is usually done for little or no net premium while the collar may actually generate a small amount of net premium.

    Since a collar is selling a covered call ownership of the underlying stock is necessary.

    See the OptionMath.com Collar Cheat Sheet