A collar is an alternatives strategy that includes purchasing a downside put and selling a potential gain call that is executed to secure against huge misfortunes, yet which likewise restricts huge potential gain gains. The protective collar strategy includes two systems known as a protective put and covered call.

A collar options strategy is a risk management technique used to protect against potential losses while allowing limited profit. It involves holding a stock, buying a protective put option (which gives the right to sell the stock at a specific price), and selling a call option (which gives the buyer the right to purchase the stock at a higher price).

The put option limits downside risk by setting a minimum selling price, while the call option generates premium income, offsetting the cost of the put. However, selling the call caps the maximum profit potential. Collar strategies are popular with investors who want to secure gains on a stock they own while minimizing potential losses, typically in volatile or uncertain markets.