Protective Collar for Unrealized Gains

A protective collar brackets a stock you own: a bought put sets a floor you can't fall below, and a sold call caps your upside and pays for the put. It locks a range around an unrealized gain without selling the shares.

You hold a stock that has risen, want to protect the gain, and will accept a capped upside to pay for it.

Pillar 1 · Illustrative setup

How this example is built

Own the shares, buy a protective put below the price for a floor, and sell a call above the price whose premium pays for the put — often a 'zero-cost collar.'

Illustrative inputs only — not live prices.

Open the on-device calculator →

Figures are measured from the current price. The on-device calculator covers vertical spreads; the collar figures above use this illustrative setup.

Pillar 2 · When & why

Why this fits Protecting Unrealized Gains

Long-term holders use collars to defend a large unrealized gain through an uncertain stretch without triggering a taxable sale. The cost is your upside — if the stock keeps running, you're capped at the call strike.

Below the put strike you're protected, but the cap means you forgo gains above the call strike, and a sold call can be assigned early, costing an upcoming dividend. 'Zero-cost' refers to the option premiums netting out, not to giving up nothing — you're trading away upside.

Pillar 3 · Risk / reward

The defined-risk math