Collar Cost Calculator
Price an option collar on a stock position — buy a protective put, sell a covered call — to see the net cost, downside floor, upside cap and max gain and loss.
How it works
Net premium = put premium − call premium · Max gain = (call strike − stock − net premium) × shares · Max loss = (stock − put strike + net premium) × shares
A collar protects a stock position by pairing a bought put (a downside floor) with a sold call (an upside cap), using the call premium to help pay for the put. A zero-cost collar picks strikes where the two premiums cancel. The trade-off is symmetric: you cannot lose below the put strike, but you also cannot gain above the call strike, so it suits a holder who wants to lock in a range near a gain.
Worked example
On 100 shares at $100, buy the $95 put for $2.50 and sell the $108 call for $2.00. The net cost is $0.50 per share, or $50. Losses stop at the $95 floor (max loss ≈ $550 including the debit) and gains stop at the $108 cap (max gain ≈ $750).
Frequently asked questions
What is a zero-cost collar?
One where the call premium you receive fully pays for the put you buy, so the net premium is zero. You give up more upside (a lower call strike) in exchange for free downside protection.
When does a collar make sense?
When you hold a stock with an unrealized gain you want to protect but are not ready to sell — often for tax timing. The collar caps risk cheaply while keeping you invested.
What happens if the stock finishes between the strikes?
Both options expire worthless and you keep the shares, having paid or received only the small net premium. That in-between zone is where a collar simply reduces volatility without being exercised.
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Educational estimate using a simplified Black–Scholes / options model — no dividends, no early-exercise, no fees or slippage. Options are high-risk. Not investment advice.