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Collar: shares, a short call, and a long put

Own 100 shares. STO (sell to open) a call for income and BTO (buy to open) a put for a floor. Close with BTC (buy to close) and STC (sell to close).

A collar is a covered call plus a long put on the same 100 shares. The short call pays for some or all of the put. You live in a band: floor at the put strike, cap at the call strike. Not a wheel — you bought protection.

Own 100 at $100. Sell a $110 call for $3. Buy a $90 put for $2. Net credit $1. Floor $90, cap $110. Teaching numbers only.

The lab includes the shares. Slide below $90 and above $110: the floor and cap show in P/L (profit and loss). Stock still dominates delta.

collarOwn 100 shares, sell a call for a cap, buy a put for a floor. A band between two strikes.Collar — a band, not a free-fallTeaching sketchOwn 100The shares staySTO callIncome · cap at KcBTO putFloor at KpOwn 100 at $100 · sell $110 call for $3 · buy $90 put for $2Kp $90 floorKc $110 capyou live in this bandcrash stops here
Covered call plus a long put. The short call pays for some or all of the floor. Not a wheel — you bought protection.

Teaching lab

Shares, short call, long put

Own 100 at $100. STO $110 call for $3. BTO $90 put for $2. Floor and cap.

P/L / share
+0.68
×100
+68
Delta
+0.740
Gamma
-0.0089
Theta / day
+0.0107
Vega / vol pt
-0.0272

P/L / share

vs the lesson entry

10.380.00-9.50$60$80$100$120$140

Delta

share-equivalent

0.750.00$60$80$100$120$140

Gamma

peaks near the strikes

0.0480.000-0.039$60$80$100$120$140

Theta / day

clock

0.0480.000-0.026$60$80$100$120$140

Vega / vol pt

fear priced in

0.120.00-0.15$60$80$100$120$140

Rho / rate pt

small at 45 days

-0.031-0.135$60$80$100$120$140

Net credit $1 on these numbers. Stock still dominates delta. Teaching only.

First: covered call (this is that, plus a put)

Tickets for this structure

BTO (buy to open) · STO (sell to open) · BTC (buy to close) · STC (sell to close). Illustrative fills only. We never send these orders.

STO (sell to open)

Open a short

Sell to open (call)

Own 100 MSFT at $420. STO (sell to open) 1× 45-DTE (days to expiration) $440 call at $8.00 ($800). That credit funds the put.

BTO (buy to open)

Open a long

Buy to open (put)

Same batch: BTO (buy to open) 1× 45-DTE (days to expiration) $400 put at $7.00. Net credit ≈ $1. Floor $400. Cap $440.

BTC (buy to close)

Close a short

Buy to close (call)

Drop the cap: BTC (buy to close) the $440 call. STC (sell to close) the put too, or you are left long that put.

STC (sell to close)

Close a long

Sell to close (put)

Drop the floor: STC (sell to close) the $400 put. At $390 expiration the put pays; shares stay yours.

Collar vs covered call vs wheel

Covered call = shares + STO (sell to open) call. Collar = that, plus BTO (buy to open) put. Wheel = CSP (cash-secured put) then covered call, usually no long put. A collar spends (or spends most of the call credit) to buy a floor. Use it when you must hold the stock through an event and will not accept a free-fall.

How the Greeks move

Shares +1.00 delta, short call cuts it and collects theta, long put adds negative delta and costs theta. Slide through $90 and $110. The package is a band, not a covered call.

Checking for a quiz…

Teaching numbers only — not a live quote, not a fill, not financial advice. All lessons · Back to Practice · Replay · Journal.