Can’t bare to be short? Try a Bear Collar

It is not secret for those that follow my trading that I utilize Collars frequently in my trading. Some current trades with Collars:

  • $AMBA I am long stock & own the March 34/32/27 Collar Put Spread
  • $APC I am long stock & own the March 85/82.5/77.5 Collar Put Spread
  • $BAS I am long stock & own the March 22.5/20/17.5 Collar Put Spread (capped)
  • $TRIP I am long stock & own the March 90/95 Collar (Put is higher than Call strike, capped)

There are several key benefits to using Collars but for this post I thought I would highlight a more rare use of them – the Bear Collar.

You won’t see this mentioned much (I sure don’t) but here is how a Bear Collar is layed out:

1) You are short stock

2) You sell downside Puts

3) You buy upside Calls (or a Call Spread)

I have several positions with a Bear Collar on including $PCLN:

  • I am short stock at $1354.3 from 03/10
  • I am short the March $1330 Puts
  • I am long the March 14w $1340 Calls
  • This Bear Collar was done for a $.80 debit on 03/10

Price is currently hovering around the $1320 level so the short stock is capped. If I do nothing with the trade tomorrow, the long $1340 Calls will go poof & I lose my short stock protection (the point to a Bear Collar). This will be something that I will tend to on Friday, 03/14.

 

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