Key Point The collar strategy allows for a limited but
continued capital appreciation of a long stock position while
providing for a limited, fixed downside exposure. The position
is very inexpensive to initiate due to the offsetting premiums
of the long (purchased) put and short (sold) call.

The collar is an excellent protective strategy for an investor
who has a bullish opinion on a stock.

In looking at the bullish lean example, one of the flaws is the
fact that if you move that upside call to the higher strikes you
may overly decrease the amount of premium you receive for the
sale of that call which, as you know, is supposed to compensate
for the amount spent on your protective put.

One way to adjust for this is to look further out across the
months in the strike you are interested in. Selling a call out
two or three months may generate enough premiums to fully offset
the price of the put.

Remember, premiums increase over time for all options. You do
not have to be confined by the idea that your long put and short
call have to be in the same expiration month.

This adjustment provides more acceptable premium balance
allowing extra room for a strong upward stock move while still
giving you maximum downside protection.