Collar

Dictionary Says

Definition of 'Collar'

1. A protective options strategy that is implemented after a long position in a stock has experienced substantial gains. It is created by purchasing an out of the money put option while simultaneously writing an out of the money call option. 

Also known as "hedge wrapper".

2. A general restriction on market activities.

Investopedia Says

Investopedia explains 'Collar'

1. The purchase of an out-of-the money put option is what protects the underlying shares from a large downward move and locks in the profit. The price paid to buy the puts is lowered by amount of premium that is collect by selling the out of the money call. The ultimate goal of this position is that the underlying stock continues to rise until the written strike is reached.

2. An example is a circuit breaker which is meant to prevent extreme losses (or gains) once an index reaches a certain level.

Collars can protect you against massive losses, but they also prevent massive gains.

Directory (Option Strategy)

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    A payment ...

  4. Backspread

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  5. Bailard, Biehl And Kaiser Five-Way Model

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  6. Bear Call Spread

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  7. Bear Put Spread

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  8. Bear Spread

    1. An option ...
  9. Bear Straddle

    A speculative ...
  10. Box Spread

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  11. Bull Call Spread

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  12. Bull Put Spread

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  13. Bull Spread

    An option ...
  14. Bullet Trade

    The act of ...
  15. Butterfly Spread

    A neutral option ...
  16. Buy A Spread

    Option strategy ...
  17. Calendar Spread

    An options or ...
  18. Call Ratio Backspread

    A very bullish ...
  19. Collar

    1. A protective ...
  20. Collar Agreement

    An arrangement ...
  21. Condor Spread

    Similar to a ...
  22. Contingent Order

    1. An order ...
  23. Conversion Arbitrage

    An options ...
  24. Covered Call

    An options ...
  25. Covered Combination

    An ...
  26. Covered Straddle

    An option ...
  27. Credit Spread

    1. The spread ...
  28. Death Put

    An optional ...
  29. Debit Spread

    Two options with ...
  30. Delta Hedging

    An options ...
  31. Delta Neutral

    A portfolio ...
  32. Delta Spread

    An options ...
  33. Diagonal Spread

    An options ...
  34. Dividend Arbitrage

    An options ...
  35. Double One-Touch Option

    A type of exotic ...
  36. Fence (Options)

    A fence or ...

  37. Fiduciary Call

    A cost effective ...
  38. Fixed Dollar Value Collar

    A floor and ...

  39. FMAN

    One of the three ...
  40. Forex Hedge

    ...
  41. Forex Option & Currency Trading Options

    ...
  42. Form 6781: Gains And Losses From ...

    A tax form ...

  43. Front Fee

    The option ...
  44. Gut Spread

    An option ...
  45. Heston Model

    A type of ...

  46. Horizontal Spread

    An options ...
  47. Implied Volatility - IV

    The estimated ...
  48. Interest Rate Collar

    An investment ...
  49. Iron Butterfly

    An options ...
  50. Iron Condor

    An advanced ...
  51. Leg

    1. Term ...
  52. Leg Out

    One side of a ...
  53. Long Jelly Roll

    An option ...
  54. Long Leg

    The part of ...

  55. Long Put

    An options ...
  56. Long Straddle

    A strategy of ...
  57. Long-Term Equity Anticipation ...

    Publicly traded ...
  58. Married Put

    An option ...
  59. Modidor

    An options ...

  60. Multi Index Option

    A type of ...

  61. Multi-Leg Options Order

    A type of order ...
  62. Naked Call

    An options ...
  63. Naked Put

    A put option ...
  64. Negative Butterfly

    A non-parallel ...
  65. Net Option Premium

    The net amount ...
  66. Neutral

    1) A term that ...
  67. Option Premium

    1. The income ...
  68. Outright Option

    An option that ...
  69. Overwrite

    A type of ...
  70. Overwriting

    An options ...

  71. Positive Butterfly

    A ...
  72. Protective Put

    A ...

  73. Put

    An option ...
  74. Put Calendar

    An option ...
  75. Put Ratio Backspread

    An option ...

  76. Ratio Call Write

    An option ...
  77. Ratio Spread

    An options ...
  78. Reverse Calendar Spread

    An options or ...
  79. Reverse Conversion

    A finance and ...
  80. Risk Reversal

    1. ...
  81. Roll Down

    The replacement ...
  82. Roll Forward

    To extend the ...
  83. Roll Up

    The move from ...

  84. Seagull Option

    A three-legged ...
  85. Sell To Open

    A phrase used by ...
  86. Series 4

    A securities ...
  87. Short Leg

    Any contract in ...
  88. Short Straddle

    An options ...
  89. Straddle

    An options ...
  90. Strangle

    An options ...
  91. Swing Option

    A type of ...

  92. Synthetic Dividend

    A type of ...
  93. Variable Ratio Write

    An option ...
  94. VIX Option

    A type of ...
  95. Writing An Option

    The ...

  96. Zero Cost Collar

    A type of ...
  97. Zomma

    An options greek ...

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Related Definitions

  1. Ceiling

    The maximum ...
  2. Circuit Breaker

    Refers to any of ...
  3. Floor

    The lowest ...
  4. Trading Curb

    A temporary ...
  5. Trading Halt

    A temporary ...
  6. Out Of The Money - OTM

    A call option ...
  7. Strike Price

    The price at ...
  8. Married Put

    An option ...
  9. Covered Call

    An options ...
  10. Collar Agreement

    An arrangement ...

Articles Of Interest

  1. Don't Forget Your Protective Collar

    Guard your finances in uncertain times with a protective collar strategy, which provides short-term downside protection.
  2. Putting Collars To Work

    Find out which protective or bullish collar will result in your optimal risk/return level.
  3. Using LEAPS With Collars

    This options strategy will help you lock in profit while keeping your upside potential.
  4. Trade Smarter With Equivalent Positions

    Understanding the concept of equivalent positions will help you trade more efficiently and save money on trade fees.
  5. Cut Down Option Risk With Covered Calls

    A good place to start with options is writing these contracts against shares you already own.
  6. Solutions For Concentrated Positions

    Learn various tactics for divesting your overexposure to any one stock.
  7. Use Married Puts To Protect Your Portfolio

    Learn how put options can act as insurance for volatile stocks in your portfolio.
  8. Costless Collars: Because Asset Allocation Is Not Enough

    Collars are extremely flexible, and can be much more beneficial to your portfolio than asset allocation.
  9. Minimize Risk With The Long Collar

    Think your favorite stock is on the way down? This simple option-trading strategy can help you manage your risks without selling the stock.
  10. Retirement Savings Tips For 35- To 44-Year-Olds

    Learn how the "sandwich generation" can save for retirement while taking care of their kids and parents.

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