Collar
Long stock + protective put (lower K) + covered call (higher K) — bounded return with downside protection.
Collar: long stock + long put(K_put) + short call(K_call), K_put < S < K_call. Often structured zero-cost (premium from short call ≈ premium of long put). Maximum profit = K_call − S + net premium. Maximum loss = S − K_put + net premium. A zero-cost collar eliminates net premium but caps upside and insures downside. Used to protect concentrated equity positions without selling.
Related Terms
Protective Put
Owning the underlying and buying a put option as insurance against downside loss.
Covered Call
Owning the underlying asset and selling a call option against it to generate premium income.
Put-Call Parity
The no-arbitrage relationship between European call and put prices: C − P = S·e^(−δT) − K·e^(−rT).