Neutral / protective
Collar
Cheap downside protection — by capping the upside.
Own the stock, buy a protective put, and sell a call above the price to pay for it. The sold call funds the put (sometimes entirely), so you get downside protection cheaply — in exchange for capping your gains at the call strike. A popular way to lock in a range around a holding.
Construction
Own 100 shares + buy 1 put + sell 1 higher-strike call.
Max profit
Capped at the call strike (plus any net credit)
Max loss
Limited by the put (down to its strike)
Breakeven
Around the stock cost, adjusted for the net premium
Play with the payoff
Neutral / protective
At expiryToday (30d, 30% IV)
Max profit
$7.50
Max loss
−$2.50
Breakeven
$102.50
Best when
- You want cheap downside protection on a holding
- You're willing to cap the upside to fund it
- You want to lock in a range, e.g. around gains