Zero Cost Collar

A zero cost collar is an options trading strategy involving the purchase of a put option and the sale of a call option at the same time, with the same strike price and expiration date. The two options offset each other, creating a "collar" of protection with no cost to the investor.

For example, an investor might buy a put option at a strike price of $50 and sell a call option at the same strike price of $50. The two options would create a collar of protection around the investor's position, without requiring any additional payment. The investor would benefit from any downside protection offered by the put option, while capping their upside potential with the call option.

Formula: Long Put + Short Call = Zero Cost Collar