Question 1

What is a Collar?

Accepted Answer

You own (long) 100 shares of stock then sell (short) an OTM Call and buy (long) an OTM Put

Question 2

What is the max loss of a Collar?

Accepted Answer

The max loss is None since a breach of the sold Call simply results in your shares being called away.

Question 3

When do I breakeven when utilizing a Collar strategy?

Accepted Answer

The breakeven is defined as Stock price remains anywhere between the Call and Put strikes.

Question 4

What is the typical application of a Collar?

Accepted Answer

The typical applicatio is: 1. Limit (drastically) your stock's upside profit to protect against large price decreases.