when you start the collar strategy in the above scenario you receive a net credit of 1 50 per share and 1 50 100 1 500 
this is because you sold the call for 1 50 more than you paid for the put and you pocket that difference for now let s also look at what it would take to break even breakeven underlying cost put cost call premium received 80 3 00 4 50 78 50 in the stock pricelet s now calculate the best upside you would see with this strategy maximum profit for a credit collar call strike stock purchase price net premium paid 97 80 1 50 18 50 100 shares per contract 1 850lastly let s look at the worst possible outcome maximum loss for a credit collar put strike stock purchase price net premium collected 77 80 1 50 1 5 100 shares per contact 150pros and cons of a collar strategythis strategy appeals to investors seeking to protect their long positions against market volatility or downside risk however like all investment strategies it has its benefits and drawbacks a collar is worthwhile when an investor is looking to protect gains on a stock that has appreciated in value but is concerned about a potential short term downturn in the market so a collar is helpful if you are moderately bullish or neutral on the stock and want to hedge against potential downside risk without costing too much but if you re very bullish on a stock you are limiting profits you anticipate are possible it s likewise a promising approach for investors comfortable capping their upside potential in exchange for downside protection this makes it a fitting strategy for conservative investors or those approaching a financial goal when preserving gains is more important than achieving potentially higher returns the main downside to a collar is that it does cap upside gains if the underlying asset continues to rise past the call s strike price meanwhile if the stock price does not fall to the put strike price level the put option s cost would have been an unnecessary expense 1downside protectionsome upside participationcan be low cost or a net credit to docaps upside potentialrequires active monitoringcosts more that a covered call since you buy a put