Collar
Holding shares while buying a protective put and writing a call, funding the protection with the premium received.
Formula
Net Cost = Put Premium - Call Premium; Outcome is bounded between (Put Strike - Net Cost) and (Call Strike - Net Cost)
Unit
₹
In depth
A collar fixes both a floor and a ceiling on a holding, which makes it the standard structure for someone who must hold a concentrated position but cannot bear a large fall — a promoter under lock-in, or an employee holding vested stock. When the two premiums offset exactly it is a zero-cost collar, though zero cost refers only to cash outlay and not to the upside surrendered. The position is a combination of a protective put and a covered call and inherits the character of both. It removes most of the distribution's variance in exchange for most of its potential.
Worked example
Own 1,000 shares at ₹500, buy a 480 put at ₹10 and write a 530 call at ₹11. The net credit is ₹1 a share, and the outcome is bounded between ₹481 and ₹531 — a range of 10% around a ₹500 holding.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Collar” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.