Collar
Hold the asset, buy a protective put, and sell a call to pay for it.
The view: I want to keep this, but not the tail risk.
Construction
| Leg | Qty | Strike at 100 spot |
|---|---|---|
| Long underlying | 100 | — |
| Long put | 1 | 95 |
| Short call | 1 | 105 |
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- Max profit
- +527
- Max loss
- -473
- Breakeven
- 99.73
- Net cash
- -9,973
When it fits
A concentrated holding you cannot or will not sell — vested shares being the obvious case. The short call funds the insurance, sometimes entirely.
What goes wrong
- You give up the upside above the call strike, which on a concentrated position is often the whole reason you held it.
- Selling calls against shares you cannot deliver creates a real problem if assigned.
- For employee shares, the tax treatment of a collar is rarely as simple as the payoff diagram.
Try it properly
The chart above is the real pricing model, limited to three sliders. To change strikes, add legs, switch to futures, or price it against your own volatility assumption, open it in the options P&L calculator — the link under the chart carries this exact position across.
Education, not advice. Payoffs ignore commission, bid-ask spread, assignment risk and financing.