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Collar calculator
a floor under your shares, paid for by the ceiling

A collar holds shares, buys a put below for protection, and sells a call above to pay for it. It converts an open-ended stock position into one with a known floor and a known ceiling. It is the standard way to protect a large, appreciated holding without selling it and triggering tax.

Outlook: Protective — holding shares

Max profit

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best case at expiry

Max loss

—

worst case at expiry

Breakeven

—

where the trade turns even

Net debit / credit

—

to open the position

Your collar

Per-share premiums. One contract = 100 shares.

Underlying price

Your cost basis

what you paid per share

Long put @ strike

Premium paid

Short call @ strike

Premium collected

Contracts

100 shares each

Profit at expiry Loss at expiry Breakeven Strikes & spot

How a collar pays

Net cost = put premium paid − call premium collected (negative means the collar pays you to put it on) Floor = put strike − net cost (worst case, per share) Ceiling = call strike − net cost (best case, per share) Breakeven = cost basis + net cost

Your downside genuinely stops. Unlike a covered call, where the premium is a small cushion, the long put is real protection with a hard floor.
A zero-cost collar is achievable. Choosing strikes where the call premium matches the put's makes protection free in cash terms — but not free in upside.
The ceiling is the true cost. You surrender everything above the call strike. On a stock that runs, that is the expensive part.

Worth naming. Collars are often described as free protection, which is misleading. The put is paid for by capping your gains, and on a position you hold precisely because you expect it to appreciate, that cap can cost far more than the premium ever would have.

What this does not model

Every figure here is the payoff at expiry. Before then your position is marked at market prices that still carry time value, so a trade can show a loss while sitting exactly where you wanted it — falling implied volatility alone will do that.

Short legs carry assignment risk. American-style options can be exercised at any time, most commonly on in-the-money calls just before an ex-dividend date. The diagram assumes you hold every leg to expiry.

For the full version — Greeks, marks and what-if scenarios — that is what the GreeksView desk does, in your browser, against option-chain figures from our licensed market-data feed.

Frequently asked questions

What is a zero-cost collar?

One where the premium collected on the short call exactly offsets the premium paid for the protective put, so the position costs nothing to establish in cash. It is not free in substance — you have paid for the protection by surrendering the upside above your call strike.

How much downside protection does a collar give?

Complete protection below the put strike. Unlike a covered call, where the premium cushions only a small decline, the long put sets a hard floor: below that strike, further falls in the stock are matched by gains in the put.

When does a collar make sense?

Most often on a large, appreciated holding you do not want to sell — because selling triggers capital gains, or because it is restricted stock. A collar brackets the outcome without a disposal. It is also used ahead of a known event where you want to stay invested but limit the damage.

What happens if the stock finishes between the strikes?

Both options expire worthless and you simply keep the shares, out the net cost of the collar. That is the most common outcome, and it is why a repeatedly-rolled collar can quietly erode returns in a flat market.

Are commissions included in these numbers?

No — every figure is gross. On multi-leg positions this matters more than people expect: four legs to open and four to close is eight commissions against what may be a couple of hundred dollars of credit. Check your broker's per-contract rate against the max profit shown here before deciding a trade is worth putting on.

See it on a real chain

The numbers above are the ones you typed. Here is a collar built from SPY's own chain at the last close — real strikes, real premiums, with its breakevens and probability of profit.

SPY collar, priced from the close →

Run this on the GreeksView desk against a real option chain

GreeksView builds positions from real option chains, with Greeks labelled by source and delay, gamma exposure and what-if scenarios — in your browser, on figures from our licensed market-data feed.

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Educational tool only — not investment advice, and not a recommendation to enter any position. Options involve substantial risk and are not suitable for every investor. Figures are theoretical, exclude commissions and taxes, and assume the position is held to expiry. GreeksView is not a broker and does not hold funds.