Collar
A strategy combining a covered call and a protective put to limit both upside and downside on a stock position.
Explanation
A collar involves holding the underlying stock, buying an out-of-the-money put for downside protection, and selling an out-of-the-money call to offset the put cost. It creates a range of limited outcomes, making it popular for protecting gains on existing positions.
Example
You own 100 shares of AAPL at $150. You buy a 140 put and sell a 160 call, both expiring in 45 days. Your downside is capped at $140 and upside at $160.