Protective collar options trading strategy in Stock market technical analysis #shorts #short #krinu

Protective collar is a bearish strategy here an investor constructs this strategy for the underlying asset (shares of some stock) he owns , he does this when he thinks the price of the stock has reached a saturation and may go down in a specific period of time , thus by doing this he can gain from the fall in the price of the stock in-spite of his Long position in the stock . further he funds this strategy with the premium he receives from one of the Leg ; which makes it more attractive and efficient

in Protective collar the buyer buys an OTM (Out of The Money) Put option and pays the premium to the seller, simultaneously he sells OTM Call option and receives the premium from the call buyer , he uses this premium to fund his Leg -1 premium to be paid by him , the expiry for both these contracts should be the same for the same underlying asset or Stock

What is ITM OTM ATM in Options : https://youtube.com/shorts/8QPCYiDmlfc

so here in Protective collar strategy if the market price is below the Break even of Leg -1 and Leg-2 then the Investor makes profit from both the legs, further he exercises his right to sell the shares he holds to the seller at a higher or strike price of Leg-1 contract though the current market price CMP being less than the strike value , thus benefiting from fall in price , same for Leg-2 the call option buyer had paid a premium that's his profit ( which he has used to fund the Leg-1 contract)

Break even calculation : https://youtube.com/shorts/B_v2XHRlIM0

This protective collar is highly beneficial for an Investor when he/she knows that the price may fall after a surge or rally and creates an protective shield on his/her long position

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