Equity Collars

Equity Collars

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Equity Collars

Equity Collars definition:  An equity collar is created by selling call options and buying put options on the same security.  A collar is a defensive strategy with a defined range of acceptable stock prices with limited upside and downside. The put protects from downward price movements but comes at a price.  A call option is sold to provide income that offsets the cost of the put.  The investor is protected from large losses but also does not participate in large price appreciations. Wealthy families and their investment managers may consider equity collars as a method to unwind concentrated stock positions.

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