Collar Strategy Explained
Collar strategy explained for options traders. Learn setup, strike selection, hedge cost trade-offs, assignment risk, and how to scan candidates.
Frequently asked questions
Is a collar strategy bullish or bearish?
A collar is usually neutral-to-moderately bullish. It keeps stock ownership, but it is designed more to protect capital than to maximize upside over the option cycle.
Can I still be assigned early on the short call in a collar?
Yes. The short call can still be assigned early, especially when it is deep in the money, has little extrinsic value left, or an ex-dividend date is near.
When does a collar make more sense than a protective put?
A collar can make more sense when you want downside protection but want to reduce hedge cost by giving up some upside beyond the short-call strike.