Collar refers to a protective options strategy that investors use after a stock has experienced substantial gains. Investors who implement a collar strategy are typically bullish but cautious. They believe the stock will rise further and aren’t ready to sell it yet, but they want to hedge against a potential drop in value. Essentially, a collar is an insurance policy for a stock that has grown in value. It’s a low-cost way to protect gains and hedge against downside risk. The tradeoff is by using a collar strategy, an investor limits upside potential. The strategy is also known as a hedge wrapper.