Protective Collar Explained (Options Trading Strategies For Beginners)

Описание: Hi! In this video I defined and explained the protective collar options trading strategy. This strategy allows someone to protect their downside risk without having to pay a premium. Unlike most other strategies that I have covered in the past, this strategy is primarily useful when the trader already owns 100 shares of the underlying. Also, the best time to implement this strategy is when markets are extremely volatile as they are today. I tried to provide as much value as possible in this video and if there are any questions be sure to let me know in the comments section down below. Thanks in advance for leaving a like!

Protective Collar

How to open

Trader would already have 100 shares of the underlying.
Buy an out of the money put option and write an out of the money call option.

Purpose of the strategy

The trader protects their downside risk with the long put option by paying a premium to buy the put option.
By going short on a call option, the trader collects the premium of that call option, which cancels out the premium paid for the long put option.
This makes it so that the trader can experience the downside protection for free or for a net premium profit by giving up the potential upside gains they could have had if the underlying shares appreciate in value.

When to use

Good for volatile periods like right now as a result of earnings announcements sending share prices flying (Facebook and Netflix) as well as unpredictable outcomes between Russia and Ukraine, 7.5% inflation rate and regulation on Chinese tech businesses.

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0:00 Intro
0:38 How To Open
1:30 Purpose Of Strategy
5:00 Collar without 100 Shares
7:45 Best Time To Use