{"id":9843,"date":"2023-07-03T20:32:01","date_gmt":"2023-07-03T12:32:01","guid":{"rendered":"https:\/\/slashtraders.com\/?p=9843"},"modified":"2025-09-29T17:48:54","modified_gmt":"2025-09-29T09:48:54","slug":"zero-cost-collar","status":"publish","type":"post","link":"https:\/\/slashtraders.com\/en\/blog\/zero-cost-collar\/","title":{"rendered":"Unlock Zero-Cost Collar to Hedge Your Stocks for Free"},"content":{"rendered":"<p class=\"wp-block-paragraph\">We all know it costs money to buy options.\nBut do you know there is a special options strategy that costs nothing?<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">We show you what is Zero-Cost Collar, and how to buy a Put for free to <a href=\"https:\/\/slashtraders.com\/en\/blog\/delta-hedging-strategy\/\" target=\"_blank\" rel=\"noreferrer noopener\">hedge against stock price crashes<\/a>.<\/p>\n\n\n<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<span class=\"RG2iflCWtay3vgpzqEmD1JXIZAPM60Owkj4FN7sYnK9QrVSHLubxchU8\"><iframe title=\"Get Free Hedging With Zero-Cost Collar\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/0UmdaEIjLtg?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/span>\n<\/div><\/figure>\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is Zero-Cost Collar?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">The Zero-Cost Collar is a hedging strategy that combines a Covered Call with a long Put to create a zero-cost <a href=\"https:\/\/slashtraders.com\/en\/tools\/bear-call-spread-screener\/\" target=\"_blank\" rel=\"noreferrer noopener\">bearish options strategy<\/a>. It can act as insurance against stock price crashes to limit the downside risks of our stock position.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to Execute a Zero-Cost Collar?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">A <a href=\"https:\/\/slashtraders.com\/en\/blog\/sell-covered-call\/\" target=\"_blank\" rel=\"noreferrer noopener\">Covered Call<\/a> is made up of a short OTM Call to generate income for a stock position:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>When the stock price increases, 100 shares will be sold at the Call strike price.<\/li>\n\n\n\n<li>When the stock price falls, we collect the premium from selling the Call option.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-covered-call.png\" alt=\"atvi covered call\" class=\"wp-image-9850\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-covered-call.png 1280w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-covered-call-300x169.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-covered-call-1024x576.png 1024w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-covered-call-768x432.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-covered-call-18x10.png 18w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">A popular strategy is to boost stock investment income with a Covered Call.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">It's one of the most <a href=\"https:\/\/slashtraders.com\/en\/blog\/beginner-options-trading-strategies\/\" target=\"_blank\" rel=\"noreferrer noopener\">common options trading strategies<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">Even though we collect the short Call premium when the stock price falls. If the bearish trend lasts for a long time, we can still lose a lot from our investment. So we can <a href=\"https:\/\/slashtraders.com\/en\/blog\/married-put\/\" target=\"_blank\" rel=\"noreferrer noopener\">add a long Put<\/a> to limit our downside losses.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-long-put.png\" alt=\"atvi long put\" class=\"wp-image-9851\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-long-put.png 1280w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-long-put-300x169.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-long-put-1024x576.png 1024w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-long-put-768x432.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-long-put-18x10.png 18w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Buy a Put option to hedge against falling stock prices.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The income from the short Call can offset the cost of the long Put, which means the Zero-Cost Collar becomes a free hedging strategy that adds a stop-loss for our shares.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-zero-cost-collar.png\" alt=\"atvi zero-cost collar\" class=\"wp-image-9854\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-zero-cost-collar.png 1280w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-zero-cost-collar-300x169.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-zero-cost-collar-1024x576.png 1024w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-zero-cost-collar-768x432.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/atvi-zero-cost-collar-18x10.png 18w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">The value of short Call and long Put cancel each other out to create a Zero-Cost Collar.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">It's free insurance against falling stock prices.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why Use a Collar Option?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Zero-Cost Collar has a few advantages:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The long Put contract can set a stop-loss for the stock position.<\/li>\n\n\n\n<li>The premium from Covered Call and long Put cancel each other out to give us a free Put contract for hedging.<\/li>\n\n\n\n<li class=\"translation-block\">The stock position can <a href=\"https:\/\/slashtraders.com\/en\/tools\/dividend-stock-screener\/\" target=\"_blank\" rel=\"noreferrer noopener\">earn dividends<\/a>.<\/li>\n\n\n\n<li class=\"translation-block\">We can adjust the strike prices of Call and Put to suit <a href=\"https:\/\/slashtraders.com\/en\/blog\/swing-trading-strategies\/\" target=\"_blank\" rel=\"noreferrer noopener\">different market expectations<\/a> to reduce risks.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">When we feel bearish about the stock price, we can trade a narrow Zero-Cost Collar to be more protective about the downside by setting a higher long Put price.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/narrow-vs-wide-collar.png\" alt=\"narrow vs wide collar\" class=\"wp-image-9859\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/narrow-vs-wide-collar.png 1280w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/narrow-vs-wide-collar-300x169.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/narrow-vs-wide-collar-1024x576.png 1024w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/narrow-vs-wide-collar-768x432.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/narrow-vs-wide-collar-18x10.png 18w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Adjust the width between Call and Put strikes to manage risks.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">If we feel bullish, we can trade a wider Zero-Cost Collar with a higher short Call strike price to give the strategy <a href=\"https:\/\/slashtraders.com\/en\/tools\/bull-put-spread-screener\/\" target=\"_blank\" rel=\"noreferrer noopener\">more room to move upwards<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Risks of a Zero-Cost Collar<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Here are some drawbacks of the Zero-Cost Collar:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The short Call price limits the maximum profit for the strategy, as 100 shares will be sold when the stock price goes up beyond the strike price.<\/li>\n\n\n\n<li>The trade combines 100 shares with two option contracts, making it quite a complex strategy.<\/li>\n\n\n\n<li class=\"translation-block\">It <a href=\"https:\/\/slashtraders.com\/en\/blog\/portfolio-management-stocks\/\" target=\"_blank\" rel=\"noreferrer noopener\">requires a lot of capital<\/a> to purchase 100 shares.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><a href=\"https:\/\/slashtraders.com\/en\/pricing\/?utm_source=blog&amp;utm_medium=banner\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"126\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/05\/blog-trial-banner.png\" alt=\"blog trial banner\" class=\"wp-image-9717\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/05\/blog-trial-banner.png 1280w, https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/05\/blog-trial-banner-300x37.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/05\/blog-trial-banner-1024x126.png 1024w, https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/05\/blog-trial-banner-768x95.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/05\/blog-trial-banner-18x2.png 18w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Stock That Works Well With Zero-Cost Collar<\/h2>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">The <a href=\"https:\/\/slashtraders.com\/en\/tools\/best-value-stocks\/\" target=\"_blank\" rel=\"noreferrer noopener\">Bullish Value Stock picker<\/a> uses Upside to sort a list of undervalued stocks that are ready to go up.<\/p>\n\n\n\n<table id=\"tablepress-52\" class=\"tablepress tablepress-id-52\">\n<thead>\n<tr class=\"row-1\">\n\t<th class=\"column-1\">Stocks<\/th><th class=\"column-2\">Description<\/th><th class=\"column-3\">Last<\/th><th class=\"column-4\">Fair value<\/th><th class=\"column-5\">Upside<\/th><th class=\"column-6\">Dividend yield<\/th>\n<\/tr>\n<\/thead>\n<tbody class=\"row-striping row-hover\">\n<tr class=\"row-2\">\n\t<td class=\"column-1\">JD<\/td><td class=\"column-2\">JD.com Inc<\/td><td class=\"column-3\">$34.79<\/td><td class=\"column-4\">$88.37<\/td><td class=\"column-5\">154.01%<\/td><td class=\"column-6\">1.74%<\/td>\n<\/tr>\n<tr class=\"row-3\">\n\t<td class=\"column-1\">VLKAF<\/td><td class=\"column-2\">Volkswagen AG<\/td><td class=\"column-3\">$164.01<\/td><td class=\"column-4\">$359.09<\/td><td class=\"column-5\">118.94%<\/td><td class=\"column-6\">18.76%<\/td>\n<\/tr>\n<tr class=\"row-4\">\n\t<td class=\"column-1\">BIG<\/td><td class=\"column-2\">Big Lots Inc<\/td><td class=\"column-3\">$8.59<\/td><td class=\"column-4\">$18.15<\/td><td class=\"column-5\">111.29%<\/td><td class=\"column-6\">15.83%<\/td>\n<\/tr>\n<tr class=\"row-5\">\n\t<td class=\"column-1\">LGFRY<\/td><td class=\"column-2\">Longfor Group Holdings Ltd<\/td><td class=\"column-3\">$24.92<\/td><td class=\"column-4\">$52.37<\/td><td class=\"column-5\">110.15%<\/td><td class=\"column-6\">6.21%<\/td>\n<\/tr>\n<tr class=\"row-6\">\n\t<td class=\"column-1\">TCEHY<\/td><td class=\"column-2\">Tencent Holdings Ltd<\/td><td class=\"column-3\">$42.75<\/td><td class=\"column-4\">$88.97<\/td><td class=\"column-5\">108.12%<\/td><td class=\"column-6\">0.70%<\/td>\n<\/tr>\n<tr class=\"row-7\">\n\t<td class=\"column-1\">ZLNDY<\/td><td class=\"column-2\">Zalando SE<\/td><td class=\"column-3\">$14.23<\/td><td class=\"column-4\">$29.51<\/td><td class=\"column-5\">107.38%<\/td><td class=\"column-6\"><\/td>\n<\/tr>\n<tr class=\"row-8\">\n\t<td class=\"column-1\">VFC<\/td><td class=\"column-2\">VF Corp<\/td><td class=\"column-3\">$18.79<\/td><td class=\"column-4\">$38.29<\/td><td class=\"column-5\">103.78%<\/td><td class=\"column-6\">6.27%<\/td>\n<\/tr>\n<tr class=\"row-9\">\n\t<td class=\"column-1\">OCDDY<\/td><td class=\"column-2\">Ocado Group PLC<\/td><td class=\"column-3\">$13.35<\/td><td class=\"column-4\">$25.44<\/td><td class=\"column-5\">90.56%<\/td><td class=\"column-6\"><\/td>\n<\/tr>\n<tr class=\"row-10\">\n\t<td class=\"column-1\">PARA<\/td><td class=\"column-2\">Paramount Global<\/td><td class=\"column-3\">$15.74<\/td><td class=\"column-4\">$29.62<\/td><td class=\"column-5\">88.18%<\/td><td class=\"column-6\">1.23%<\/td>\n<\/tr>\n<tr class=\"row-11\">\n\t<td class=\"column-1\">CTTAY<\/td><td class=\"column-2\">Continental AG<\/td><td class=\"column-3\">$7.39<\/td><td class=\"column-4\">$13.70<\/td><td class=\"column-5\">85.39%<\/td><td class=\"column-6\">2.08%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n<p class=\"wp-block-paragraph translation-block\">JD is <a href=\"https:\/\/slashtraders.com\/en\/blog\/margin-of-safety-formula\/\" target=\"_blank\" rel=\"noreferrer noopener\">extremely undervalued<\/a> right now with 154% of Upside. It is a great candidate for a Zero-Cost Collar to profit from a bullish outlook.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To trade a Zero-Cost Collar for JD, we must purchase 100 stocks first, then sell a Call that expires next month to offset the cost of a long Put.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/jd-zero-cost-collar.png\" alt=\"jd zero cost collar\" class=\"wp-image-9868\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/jd-zero-cost-collar.png 1280w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/jd-zero-cost-collar-300x169.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/jd-zero-cost-collar-1024x576.png 1024w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/jd-zero-cost-collar-768x432.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/07\/jd-zero-cost-collar-18x10.png 18w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Cancel out the costs of Call and Put options to create a Zero-Cost Collar.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">So we get free downside protection to reduce the losses if the market crashes.<\/p>\n\n\n\n<p class=\"has-ast-global-color-4-background-color has-background wp-block-paragraph\"><a href=\"https:\/\/slashtraders.com\/en\/blog\/slashtraders-vs-sp500\/\" target=\"_blank\" rel=\"noreferrer noopener\">SlashTraders vs S&amp;P 500: 450% Outperformance, Verified Trades and How to Copy Every Alert<\/a><\/p>","protected":false},"excerpt":{"rendered":"<p>Do you know there is an options strategy that costs nothing? We show you what is Zero-Cost Collar, and how to buy a Put for free to hedge against stock price crashes.<\/p>","protected":false},"author":1,"featured_media":9844,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"plain-container","ast-site-content-layout":"normal-width-container","site-content-style":"unboxed","site-sidebar-style":"unboxed","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":"","_wp_rev_ctl_limit":"5"},"categories":[3],"tags":[56,12,64,14,11],"class_list":["post-9843","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-cn","tag-en","tag-es","tag-options","tag-tw"],"_links":{"self":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/9843","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/comments?post=9843"}],"version-history":[{"count":5,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/9843\/revisions"}],"predecessor-version":[{"id":13955,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/9843\/revisions\/13955"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/media\/9844"}],"wp:attachment":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/media?parent=9843"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/categories?post=9843"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/tags?post=9843"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}