What is a Collar?
A Collar means you own shares, buy a Protective Put (downside insurance), and sell a Covered Call (upside income that funds the put). Often structured so the call premium fully pays for the put — creating a zero-cost hedge. Your upside is capped at the call strike, but your downside is also capped at the put strike.
You own Infosys at ₹1,750. You buy a ₹1,700 Put for ₹80 and sell a ₹1,850 Call for ₹80. Net cost: zero. You're now protected below ₹1,700 and capped above ₹1,850. Your range of outcomes: no worse than ₹1,700 exit, no better than ₹1,850 exit — for free.
A Collar is the classic institutional portfolio hedging technique. Fund managers use this to protect large unrealised gains heading into uncertain periods (elections, earnings, global events) while funding the protection through the call premium. Zero-cost or near-zero-cost protection.
At a Glance
Max Profit
(Call Strike − Buy Price) + Net Premium
Max Loss
(Buy Price − Put Strike) − Net Premium
Breakeven
Put Strike to Call Strike
Type
Near-Zero Cost Hedge
How to Set It Up
| Action | Type | Strike | Expiry | Qty |
|---|---|---|---|---|
| Buy | shares | Already in your Demat | - | 1 Lot |
| Buy | Put (PE) | OTM — downside floor | 30–60 DTE | 1 Lot |
| Sell | Call CE(CE) | OTM — upside cap | Same expiry | 1 Lot |
P&L Simulator
Collar
📊 Collar — Payoff Chart + P&L Calculator
Stock Buy Price: 21000 · Current Price: 22000 · Put Strike: 21500 · Call Strike: 22500 · Put Premium Paid: 120 · Call Premium Received: 80 · Lot Size: 75 · Price at Exit: 21200
When Should You Use This Strategy?
✓ When to Use / ✕ When to Avoid / ◉ IV / ◷ DTE
3 use items · 3 avoid items
