Protective Collars for Beginners: Options Learning Center
Автор: Barchart
Загружено: 2024-10-08
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Welcome to the Options Learning Center, where we will explore a wide range of topics and ideas related to options trading. This video will explain protective collars!
The collar option strategy is a risk protection strategy that provides downside protection, but also limits upside profit potential.
A collar position is a hedge strategy created when owning underlying shares and simultaneously selling a call (covered) and buying a put (protective). Call options are typically sold above the price, and put options are typically bought below the price.
Depending on market conditions, the collar strategy can be established for either a debit or a credit. The opportunity loss of a collar position would be if the security price increased significantly above the strike price, as your gains are capped. Maximum loss will occur if the underlying security is at or below the lower strike price at expiration. Maximum profit is achieved if the underlying asset is at or above the higher strike price at expiration.
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