What is a collar option trade?

A collar option trade is less bearish than buying puts outright, but it protects a trader from large losses. Also, selling the upside call helps finance the protective position. A collar option strategy limits risk beyond the protective put’s strike. Even if a stock price goes to zero, the trader’s loss maxes out at the protective put’s strike.

What is the ironed collar options strategy?

The ironed collar options strategy is a variant of the basic collar options strategy that involves purchasing two put options with different strike prices and a call option. This strategy protects against downside risk while allowing the investor to benefit from potential upside gains.

What is the difference between collar options and covered call options?

In contrast, the covered call option generates income by allowing another investor to buy the underlying asset at a fixed price. The collar options strategy suits investors willing to sacrifice potential gains to limit their downside risk and generate additional income.

What is a synthetic collar option?

The synthetic collar is an options trading strategy that involves the simultaneous purchase of a long call option and the sale of a short put option at the same strike price, creating a synthetic long position in the underlying asset.