Protective Collar

Market Terms

We don't know everything about the markets.  We're just devoted to learners.  Taken from those smarter than ourselves, here's how we define Protective Collar.

An options strategy which protects against large losses while also limiting gains.  This is done through two strategies known as protective puts and covered calls.  The protective collar itself consists of a long position in the underlying security, a put option purchased to hedge the risk, and a call option to fund the put purchase.  Essentially a protective collar is a combination of a covered call and a long put position.