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Collar Option Trade - Definition

Collar Trade Example

The purchase of an out of the money put option protects the underlying shares from a spike downward by placing a floor on max loss.  The price paid to purchase the put is decreased by amount of premium that is received by selling the out of the money call.

Long 100-AGNC shares.
Long 1-OTM Put, AGNC
Short 1-OTM Call, AGNC