Zero Cost Collar

"A collar is an option strategy that limits the range of possible positive or negative returns on an underlying to a specific range." In other words, a collar will protect an investment against drastic downside movement by sacrificing some gains from a drastic upside movement.

A collar consists of 3 positions:

• A long underlying
• A long OTM Put (called the "floor")
• A short OTM Call (called the "cap")

By collecting more for the short call than it costs for the long put, the collar costs you nothing, and can even bring in a credit.

Suppose you owned 100 shares of TSLA, with a cost basis of $120. You believe in TSLA and are very bullish long-term. Now, suppose that TSLA is trading over $140 and you'd like to protect yourself in case the price drops.