Collar Calculator

A collar is one hundred shares, a long put below the price for protection, and a short call above the price to pay for it. With strikes chosen so the premiums roughly match it costs little or nothing, and it brackets the shares: the loss is capped at the put strike and the gain is capped at the call strike until expiry.

When it is used

Investors collar shares they want to keep through a risky period, such as a large concentrated position ahead of an event, or a gain they want to protect without selling and realising tax. It is also used by holders of restricted stock. The trade-off is explicit: giving up the upside above the call in exchange for a floor.

How it makes and loses money

Inside the band the collar moves with the shares. Below the put strike it stops losing; above the call strike it stops gaining. Time and volatility have small effects because the long put and short call largely offset. A zero-cost collar with the put further from the price than the call is the common compromise.

What to check in the grid

The expiry column is flat beyond both strikes, which is the whole point. The earlier columns are gentler versions of the same shape. Compare a collar with the shares alone by removing the two option legs: the difference in the bottom rows is the insurance, and the difference in the top rows is its price.