Collar Calculator
A collar holds shares, buys a put for a hard floor and sells a call to pay for it. Downside stops at the put strike, upside stops at the call strike, and the net cost is often near zero. Enter all three legs to see the band.
The arithmetic
The default holds 100 shares at $100, buys the $95 put for $2.20 and sells the $105 call for $2.20 — the premiums cancel, so the hedge costs nothing up front.
- Floor = $95. Max loss = $500, no matter how far the stock falls.
- Cap = $105. Max profit = $500.
- Breakeven = $100, your share cost, because the hedge was free.
- Band = a flat-bottomed, flat-topped payoff between $95 and $105.
What a "zero-cost" collar actually costs
Nothing in cash and everything above $105. That is a real price, and whether it is a good one depends entirely on what you expected the shares to do. Collaring a position you believe in is paying for insurance with the upside you were holding it for.
The premiums cancelling exactly is cosmetic, not structural. Move the put strike up on this page and the hedge costs money; move the call strike down and it produces a credit. The useful design question is not "how do I make it free" but "which floor do I need, and what is the cheapest cap that funds it".
Where collars are genuinely the right answer
Concentrated positions that cannot be sold — vested equity in a lock-up, a holding with a large embedded capital gain, shares pledged as collateral. In all three the owner has real downside risk and no ability to reduce it by selling. A collar caps the damage without triggering a sale. That is the classic use and it is a good one.
It is a poor default for a position you could simply size smaller. If you can sell, selling half is cheaper than collaring all of it and leaves you free.
Compared with the alternatives
A protective put alone keeps the upside and costs the premium. A covered call alone earns income and leaves the downside open. The collar is both at once: the flat top of the covered call, the flat bottom of the protective put, with the call premium paying for the put. Read the three charts side by side and the trade-off is immediately obvious.
Where the 100x multiplier comes from
Product specification, not convention: OCC defines a standard equity option as covering 100 shares, premium quoted in points where one point is $100[1] — so a $1.85 premium costs $185, and every payoff here applies that multiplier to the leg structure.
One exception is worth knowing about: adjusted contracts, covered on the options profit calculator.
Calculating it is the easy half
A collar is two premiums and two strikes. The payoff is arithmetic — anyone can run it. What it cannot show is whether you believed the trade when you put it on, or are describing a winner picked out of a month of noise.
That is the gap kappi closes: the position committed before the fact, sealed and timestamped on a log nobody can edit afterwards. A screenshot of this chart proves you can use a calculator; a sealed commit proves you took the trade. $15/month, no free tier.
Sources
Frequently asked questions
What is a zero-cost collar?
A collar where the call premium received equals the put premium paid, so the hedge costs nothing up front. It still costs you every dollar of gain above the call strike.
What is the maximum loss on a collar?
Your share cost minus the put strike, plus any net premium paid, times 100. In the default that is $500 regardless of how far the stock falls.
When should I use a collar instead of just selling?
When you cannot sell — locked-up equity, a large embedded capital gain, or pledged collateral. If selling is available, reducing size is usually cheaper than collaring.
Collar, protective put, or covered call?
The protective put keeps upside and costs premium. The covered call earns premium and leaves downside open. The collar caps both ends and can be arranged at near-zero cost.