Collar strategy — Put + Covered Call
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.
A simple analogy
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: the insurance is free! But if the apartment's value rises to €200,000 — the ad tenant has the right to buy it for €160,000.
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 → — but the protection is almost free, because the CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → premium covers most of the PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → cost.
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
Held: 100 SOL (worth $8,800)
All the numbers in this example are calculated on a 100 SOL base.
Long Put Strike $75:
Premium: -$240 (-$2.40 per SOL)
Protection: if SOL falls below $75 — you sell at $75
Short Call Strike $160:
Premium: +$200 (+$2.00 per SOL)
Obligation: if SOL rises above $160 — you sell at $160
Net cost: $240 - $200 = $40 (nearly zero-cost)
Pay attention to the base
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 | +$2,260 | +$200 | $5,000 | $7,460 (floor) |
| $75 | -$240 | +$200 | $7,500 | $7,460 (floor line) |
| $88 | -$240 | +$200 | $8,800 | $8,760 |
| $120 | -$240 | +$200 | $12,000 | $11,960 |
| $160 | -$240 | +$200 | $16,000 | $15,960 (cap) |
| $200 | -$240 | -$3,800 | $20,000 | $15,960 (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 $7,460
- 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 $15,960 the position stops earning more
- Between $75 and $160 the position moves almost like plain SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →, minus the $40 net cost
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:
Long Put $80 (premium: -$320)
Short Call $140 (premium: +$320)
Net cost: $0 (free!)
Floor rises to $80 (was $75) — better protection
But cap drops to $140 (was $160) — less upside
Trade-off: you pay nothing — but the corridor is narrower from the top.
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.
Zero-cost vs our strategy
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 |
| You expect large returns (>100%) | ❌ The cap limits it |
| Short-term holding | ⚠️ Too expensive (theta) |
| Long-term holding (3-12 months) | ✅ Ideal |
Summary
Where do we use this?
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 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.