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Zero-Cost Collar

Options strategy limiting price exposure within a range without paying an upfront premium.

A zero-cost collar is an options strategy combining a long put and short call, designed to protect against price declines without upfront net cost.

For example, an oil trader might buy a put at $70 and sell a call at $80, limiting downside risk while capping upside potential, with premiums roughly offsetting each other.

It is widely used in commodity, equity, and currency markets to hedge positions efficiently without capital outlay. The strategy balances risk and return under defined conditions.

Understanding zero-cost collars allows traders to protect portfolios, stabilize cash flows, and maintain market exposure while controlling hedging costs in volatile markets.

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