Max profit
$900.22
Collar calculator
Owns shares, buys a put for protection, and sells a call to pay for it. Enter your strikes and price to see the maximum profit, maximum loss, breakeven, profit chance and expected value.
Leave the price empty to estimate it from implied volatility. Results are per contract (100 shares), held to expiration.
Estimated credit: $0.22 per contract (from implied volatility; type your real price above)
Max loss
−$799.78
Breakeven
$100.00
Profit chance ?
48.6%
Expected value ?
+$0.67
Reward to risk
1.13 to 1
Get the full verdict on this trade
Free, no account. The app adds volatility skew, exit plans, position sizing and a plain-English verdict.
How to use the collar calculator
- Enter the stock's price, the days left until expiration and the implied volatility from your option chain.
- Enter each strike. Then type the price and pick credit or debit per share, or leave it empty for an estimate.
- Add the stock's realized volatility to see expected value: what the trade makes on average if the stock keeps moving the way it has been.
Worked example
Say a stock trades at $100, options price in 25% implied volatility, and the stock has really been moving about 20% a year (its realized volatility). With 30 days to expiration, a collar at strikes 92 / 109 costs close to nothing (the options roughly pay for each other).
- Max profit: $900.22
- Max loss: $799.78
- Breakeven: $100.00
- Profit chance, market-implied: 48.6%
- Expected value with 20% realized volatility: +$0.67 per contract
This trade has little exposure to volatility itself, so its expected value stays close to zero. How it turns out depends mostly on which way the stock moves.
What is a collar?
A collar holds 100 shares, buys an out-of-the-money put, and sells an out-of-the-money call.
How it makes or loses money
The put floors your loss and the call caps your gain. Often costs close to nothing.
When traders use it
Used to protect a stock position, for example ahead of earnings.
Profit and loss at expiration
- Max profit: call strike minus share price, plus or minus the net premium
- Max loss: share price minus put strike, plus or minus the net premium
The Greeks
| Greek | Sign |
|---|---|
| Delta | + (reduced) |
| Theta | ≈ 0 |
| Vega | ≈ 0 |
| Gamma | ≈ 0 |
What to watch out for
- You give up the upside above the call.
- On stocks, the short call can be assigned early, especially before dividends.
Questions
What is the max profit on a collar?
Call strike minus share price, plus or minus the net premium. In the example above that's $900.22 per contract.
What is the max loss on a collar?
Share price minus put strike, plus or minus the net premium. In the example above that's $799.78 per contract.
What does "profit chance" mean here?
It's the market-implied chance that the trade finishes with any profit at expiration, if the stock moves as much as implied volatility prices in. It assumes you hold to expiration and uses one volatility for every strike. A high profit chance doesn't mean a good trade: small, frequent wins can still lose money overall if the losses are large.
What's the difference between implied and realized volatility?
Implied volatility is how much movement option prices assume. Realized volatility is how much the stock has actually been moving. Option sellers tend to come out ahead on average when realized stays below implied, and buyers when it runs above. Expected value in this calculator uses the realized volatility you enter.
Is a collar a good trade?
This calculator can't tell you that, and neither can anyone who doesn't know your account, goals and risk tolerance. It shows the math for the numbers you enter. Whether those numbers hold up depends on the price you actually get, how the stock moves and how you manage the trade.