About the Collar Strategy Calculator
A collar protects a stock position by buying a put below the current price and paying for it, fully or partly, by selling a call above the price. The put sets a floor on your losses and the call caps your gains, so the stock’s outcome is boxed into a known range until expiration. When the call premium equals the put premium it is called a zero-cost collar.
This collar strategy calculator is for investors locking in gains on a concentrated holding, employees hedging company stock, and anyone weighing a collar against simply selling. Enter the stock price, number of shares, and the strikes and premiums of the put and call to see the net premium, the maximum loss and gain, the breakeven price, the protected range as percentages and the profit or loss at any expiry price.
The stock price is treated as your cost basis (use your actual purchase price if you want results relative to it). Results are at expiration, per 100-share contracts covering your shares, and ignore dividends, commissions, taxes and early assignment of the short call.
With the default inputs, the maximum loss is $550.00. Change any value above to recalculate instantly.
How to use the collar strategy calculator
- 1Enter the stock price or your cost basis and the number of shares.
- 2Enter the strike and premium of the put you buy for protection.
- 3Enter the strike and premium of the call you sell to fund it.
- 4Read the maximum loss, maximum gain and breakeven.
- 5Try different expiry prices or strikes to compare collars.
Formula and method
At expiration the long put guarantees you can sell at the put strike Kp, so the worst outcome is the drop from your stock price to Kp plus the net premium paid. The short call obliges you to sell at the call strike Kc, so the best outcome is the rise to Kc minus the net premium. Between the strikes the position moves one-for-one with the stock, offset by the net premium, so the breakeven is the stock price plus the net debit (or minus a net credit).
The calculator evaluates the stock, put and call legs together at every strike, so it remains correct for unusual strike choices. Percentages are relative to the stock price times the number of shares.
- S
- Stock price (cost basis per share)
- Kp
- Put strike — the protected floor
- Kc
- Call strike — the cap on gains
- Net
- Net premium per share (+ debit, − credit)
Worked examples
$100 stock, 95 put for $2.50, 110 call for $2.00
The collar costs a net $0.50 per share ($50). The worst case is falling to $95 plus the $0.50 cost: $5.50 × 100 = $550 (5.5%). The best case is rising to $110 minus $0.50: $950 (9.5%). At $104 the position makes $350.
Zero-cost collar on 300 shares at $250
The $6 call premium pays for the $6 put, so the collar is free. Losses stop at $230 ($20 × 300 = $6,000, 8%) and gains are capped at $275 ($7,500, 10%). Even if the stock falls to $220 the loss is only $6,000.
Credit collar: 500 shares at $60
Selling the 63 call for more than the 55 put costs brings in a $0.70 credit ($350). Maximum loss is ($5 − $0.70) × 500 = $2,150 and maximum gain is ($3 + $0.70) × 500 = $1,850, which is what you get at $70 because the shares are called away at $63.
Frequently asked questions
What is a collar option strategy?+
A collar combines owning shares with buying a protective put and selling a covered call. The put limits losses below its strike, the call limits gains above its strike, and the call premium offsets the cost of the put.
What is a zero-cost collar?+
A zero-cost collar uses strikes chosen so the premium received for the call equals the premium paid for the put. You get downside protection without paying cash up front, in exchange for giving up gains above the call strike.
When should I use a collar?+
Collars suit investors who want to protect a large gain or a concentrated position for a period, for example around earnings or a lock-up expiry, without selling the shares. In the US, buying a put on stock held one year or less can suspend or reset its holding period under the straddle rules, so a collar is not a reliable way to wait for long-term capital gains treatment.
What are the risks of a collar?+
You give up upside above the call strike, and the short call can be assigned early, especially before an ex-dividend date, causing your shares to be sold. Collars on appreciated stock can also have tax consequences, so check the rules for your situation.
How do I choose collar strikes?+
Pick the put strike at the largest loss you can accept, then find the call strike whose premium pays for most or all of that put. Longer expirations and higher volatility generally allow wider collars at zero cost.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.