Collar strategy — Put + Covered Call
George finds 'free' insurance for his SOL, but the price is every bit of growth above +22%. With a house, insurance and an ad on the roof, you'll see how a Collar works: a Put as the floor, a Short Call as the ceiling, a corridor you choose. The Call covers only about a fifth of the Put's cost, and zero-cost has a price.
CollarCollarAn options strategy: long put + short call + the underlying asset held. Caps both potential loss and potential gain.Read the lesson → strategy — this is a combination where you buy a put (protection against a drop) and sell a call (income that covers the cost of the protection). It's one of the core strategies institutions use — and it's what we do in Strategies A and B.
You own an apartment worth €100,000.
- You buy fire insurance (€500/year) — if the apartment burns down, you get compensated
- You rent out the roof for advertising (€500/year) — you get monthly income
Result: you pay nothing in cash for the insurance. But if the apartment's value rises to €200,000 — the ad tenant has the right to buy it for €120,000, and everything above that line goes to them.
That is exactly how a collar works: “free” protection is paid for not in cash but in forfeited upside. In crypto, where swings are large, that line sits much closer to today's price than most people expect.
The CollarCollarAn options strategy: long put + short call + the underlying asset held. Caps both potential loss and potential gain.Read the lesson → "closes off" the position from both sides: below $75 the loss stops (PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → protection), above $160 the gain stops (Short CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson →). In between it moves like SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → — minus the cost of the protection.
One thing up front: with the CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → strike this far out ($160, i.e. +82% above the price), the Call premium covers only about a fifth of the Put cost. "Almost free protection" only appears once you bring the CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → strike much closer to the current price — see the "Zero-Cost CollarCollarAn options strategy: long put + short call + the underlying asset held. Caps both potential loss and potential gain.Read the lesson →" section below.
How does a Collar work?
Structure
| Component | Action | What it's for |
|---|---|---|
| SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →/ETH held | Held | The core position |
| Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → | Bought | Protection against a drop |
| Short CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → | Sold | Income (covers the PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → cost) |
A practical example with SOL at $88
This example uses SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → = $88 and 120-day options. At the time of writing (2026-09) the market is around $102 — the numbers are illustrative, the mechanism does not depend on the price level.
Held: 100 SOL (worth $8,800)
All the numbers in this example are on a 100 SOL base, tenor 120 days.
Long Put Strike $75:
Premium: -$764 (-$7.64 per SOL)
Protection: if SOL falls below $75 — you sell at $75
Short Call Strike $160:
Premium: +$174 (+$1.74 per SOL)
Obligation: if SOL rises above $160 — you sell at $160
Net cost: $764 - $174 = $590 (the Call covers only ~23% of the Put cost)
$590 over 120 days on an $8,800 position is about 6.7% per cycle, or roughly 20% a year if you repeat it four times. That is one of the most expensive lines in the portfolio — not a rounding error you can ignore.
The reason is simple: SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →'s volatility is high, so the PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → is expensive, while the $160 CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → is so far from the price that almost nobody pays much for it. For the CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → premium to genuinely cover the PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →, you would have to drop the strike to roughly $107 — giving up all upside above +22%.
PremiumsPremiumThe price of an option. Paid by the buyer, received by the seller.Read the lesson → depend on tenor and IVIVImplied Volatility — the volatility the market expects. SOL IV is roughly 70-80%.Read the lesson → and move constantly — check live quotes before running your own numbers.
This example is a separate, simplified 100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → position — it is NOT the course's main portfolio. We cover the main portfolio (126 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → collateral, Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → $90 on 200 units) in the "CollarCollarAn options strategy: long put + short call + the underlying asset held. Caps both potential loss and potential gain.Read the lesson → in our strategies" section and in Module 6. Whenever you read any options table, always check first which quantity the numbers are calculated for — the same structure on a 100 vs 200 unit base gives twice-different results.
Scenario analysis
The PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → and CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → columns already include the premiums (100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → base):
| SOL price | Put result | Call result | SOL value | Total |
|---|---|---|---|---|
| $50 | +$1,736 | +$174 | $5,000 | $6,910 (floor) |
| $75 | -$764 | +$174 | $7,500 | $6,910 (floor line) |
| $88 | -$764 | +$174 | $8,800 | $8,210 |
| $120 | -$764 | +$174 | $12,000 | $11,410 |
| $160 | -$764 | +$174 | $16,000 | $15,410 (cap) |
| $200 | -$764 | -$3,826 | $20,000 | $15,410 (cap) |
Key points:
- Floor (lower bound) = $75 per SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → (PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → protection) → the portfolio value no longer drops below $6,910
- Cap (upper bound) = $160 per SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → (CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → assignment — a forced sale) → above $15,410 the position stops earning more
- Between $75 and $160 the position moves like plain SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →, minus the $590 net cost
- Note that the $6,910 floor is below the $7,500 you would get by simply selling SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → at $75 — that difference is the price you paid for the protection
Zero-Cost Collar
When the Short CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → premium fully covers the Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → premium:
Same 100 SOL base, 120 days:
Long Put $75 (premium: -$764)
Short Call $107 (premium: +$764)
Net cost: $0 (free!)
Floor stays at $75 (-15% from $88) — the same protection
But the cap falls from $160 to $107 (+22%) — far less upside
Trade-off: you pay nothing — but you give up all upside above +22%.
In equities (where volatility is low) a zero-cost collar often lets you keep upside to +30-40%. SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →'s volatility is several times higher, so the PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → is expensive, and to collect an equal premium from the CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → you have to bring its strike very close to the current price.
Practical rule of thumb: for a floor 15% below the price you give up upside above roughly +20-25%, not above +70% as those distant strikes might suggest. The exact numbers depend on tenor and IVIVImplied Volatility — the volatility the market expects. SOL IV is roughly 70-80%.Read the lesson → and change constantly.
This is precisely why the course strategy avoids a pure zero-cost collar and uses a Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson → (cheaper protection) plus a Covered CallCovered CallAn options strategy: sell a call option while holding the underlying asset. Generates premium income but caps upside.Read the lesson → on only part of the position.
Once you understand the collar mechanics, you can construct the exact corridor yourself — you choose where to set the floor and where to set the cap, and see what that choice costs you.
In our strategy we use a Put Spread (not a plain PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →) + a Covered Call. It's similar to a CollarCollarAn options strategy: long put + short call + the underlying asset held. Caps both potential loss and potential gain.Read the lesson →, but with these differences:
- A Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson → is cheaper than a plain PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → (so the net cost is lower)
- The Covered CallCovered CallAn options strategy: sell a call option while holding the underlying asset. Generates premium income but caps upside.Read the lesson → only covers part of the SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → (50 out of 126) — not the whole portfolio
- This gives more flexibility and a softer "cap" — only part of the position is capped, not the entire portfolio
Collar in our strategies
Strategy A
- Long Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson → ($90 for 200 units / $65 for 100 units) + Short CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → $160 (50 units), against 126 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → collateral
- Similar to a CollarCollarAn options strategy: long put + short call + the underlying asset held. Caps both potential loss and potential gain.Read the lesson →, but with a Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson → (cheaper)
- "Floor" at $65, "Cap" at $160
- The quantities don't match the 126 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → on purpose: the options quantity is chosen by delta, not by matching units 1:1 (more in 6-1)
Strategy B
- The same structure + an LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → layer
- LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → fees cover part of the options cost
- Daily carry is positive: +$1.93/d
When is a Collar a good choice?
| Situation | Does a Collar fit? |
|---|---|
| You want to protect a large position | ✅ Great fit |
| You want it for free (zero-cost) | ⚠️ Possible, but the cap drops to ~+20-25% |
| You expect large returns (>100%) | ❌ The cap limits it |
| Short-term holding | ⚠️ Too expensive (theta) |
| Long-term holding (3-12 months) | ✅ Ideal |
Summary
| Aspect | Meaning |
|---|---|
| Structure | Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → + Short CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → + UnderlyingUnderlyingThe underlying asset an option is based on (e.g. SOL, ETH).Read the lesson → |
| Goal | Cap both loss AND gain |
| Cost | In cash — from $0 (zero-cost) up to a few % of the position; “zero-cost” is paid for in forfeited upside |
| Floor | PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → strike |
| Cap | CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → strike |
| Our use | Strategy A and B (a modified version with a Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson →) |
We use this collar strategy directly in Strategy A (Module 6-2) — there it's combined with DeFiDeFiDecentralized Finance — financial services without intermediaries, operating through smart contracts.Read the lesson → lending and concentrated LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson →.
The Collar strategy is the foundation of our portfolio. Once the platform launches, it will help you track every component in real time.
For now, all of this is done by hand, as shown in the lesson.
The final task of the module — put together a full Collar plan with real premiums (~25 min). All on paper: no buying, no selling.
This is a PAPER plan — we're learning to construct a strategy, NOT to trade. Don't buy or sell anything.
This is learning, not investing — use only small amounts you treat as tuition.
You just constructed a full Collar plan with real Deribit prices — protection from both sides, the kind institutions use. Most people never do this.