A collar combines a protective put and a covered call on the same shares at once — bracketing both the maximum loss and maximum gain into a defined range.
How it works
The put premium paid minus the call premium received gives the net cost per share; that net cost, combined with each option’s strike price relative to the current price, defines both the maximum loss percentage (from the put floor) and maximum gain percentage (capped by the call).
What this does not include
This does not include what happens between the two strikes — inside that range, the position simply moves with the stock price like an ordinary shareholding, with the collar’s protection and cap only mattering once the price moves beyond either strike.
How to use this calculator
- Enter shares owned, current price, put strike and premium, and call strike and premium.
Frequently asked questions
What is a “zero-cost collar”?
A collar structured so the call premium received exactly offsets the put premium paid, giving downside protection at no net upfront cost — in exchange for capping the upside at the call strike.
Why would an investor accept a capped upside at all?
Often to protect a large, concentrated stock position (common after an IPO or executive compensation vesting) without triggering a taxable sale, locking in a defined risk range instead.
Is a collar the same as a “married put”?
No — a married put is just the protective put leg alone, without selling a call; a collar specifically adds the call sale to help offset (or fully fund) the put’s cost.
