How To Use A ‘Collar’ To Protect Your Portfolio Against Losses

| March 17, 2022

collarHow can we protect our portfolio against losses when stocks are in a correction?  Or even if stocks are not currently in a correction?   There are many schools of thought on that.

One relatively straightforward way to protect open stock positions is to buy Put protection.  Puts are option contracts that have an inverse correlation to price.   If the shares go down in price, the value of the Put will increase, thereby providing some offset to losses in the underlying stock.

A Collar can be an effective strategy to ensure against significant losses.  A common way to offset the cost of purchasing protective Puts is to implement a Collar strategy using options.

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Category: Options Trading Strategy

About the Author ()

Adrian Collins works as an Outreach Manager at Option Dash. Option Dash is always looking forward to offering the best covered call and cash secured put screener on the internet. Adrian is passionate about spreading knowledge on stock and options trading for the rising investors.