Collar strategy

Checked October 2026

A collar owns the shares, buys a put below the market, and sells a call above it, so both the loss and the gain have a cap. Cboe's CLL uses a put at 95% and a call at 110% of the S&P 500. Backtoast ran it. The 95-110 version made 1.3% a year at +1.26% a trade, but failed our test on trade frequency, capacity, outlier dependence and the buy-and-hold benchmark.

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Collar strategy

The put sets a floor 5% under the index, the call gives away anything past 10%, and the call's premium pays part of the put's cost.

Cboe's rule buys a three-month put at 95% each quarter and sells a one-month call at 110% every month. The run couldn't hold a monthly call against a quarterly put, so it sold a three-month call at 110% with each put instead.

Without the call it's a protective put, and without the put it's a covered call strategy.

When it works

A collar beats owning the shares in a sharp sell-off, where the put stops the loss near 5%, and trails them in a strong rally, because the call gives away anything past 10%. Traders use it to keep a position they don't want to sell, such as a large stock holding with a big unrealized gain, with a known floor and a hedge that costs less than the put alone. Moving the call close enough that its premium pays for the whole put, a zero-cost collar, is the common variant, at the price of a lower cap.

Origins

Cboe publishes the rule as its CLL index on the S&P 500. Israelov and Klein studied collars like it in the Journal of Alternative Investments in 2016, and from 1986 to 2014 the index made 3.2% a year above cash with 10.7% volatility, against 7.3% and 15.7% for the S&P 500. The run used SPY from late 2021 to the end of 2025, and didn't credit SPY's dividends.

The run is Backtoast's, from 29 October 2026, after costs.