Derivatives · Core
Collar
A collar is long stock, long a put, and short a call — a banded payoff, often structured to be zero-debit.
Definition
The short call finances the long put. You cap upside to buy a floor. Zero-debit collars set strikes so premia cancel. Residual is stock between the strikes.
Why it matters
Concentrated holders (founders, PE exits) use collars to hedge without writing a check. The cost is the sold upside.
Case
An insider collars a post-lockup block: floor at −15%, cap at +20%. The stock rips 40% and they ‘missed it.’ That was the contract.
How to read it
Width, tenor, and whether the call is the stock you wanted to own. A collar is a view that you are happy in a range.
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