Collar Strategy Calculator

Calculations use straightforward cash-flow accounting: purchase cost of the underlying plus option premiums paid minus option premiums received, adjusted for per-contract commissions.

Risk limits (maximum loss and capped gain) are computed at expiry assuming options are held to expiration and exercised only at or beyond strike prices. This approach follows general model-validation practices recommended by standards bodies for risk calculations and documentation.

Model validation and operational controls should follow recognised frameworks such as the NIST Risk Management Framework for model governance, ISO risk-management guidance for documentation, and IEEE principles for software accuracy and reproducibility where applicable.

Example: Buy 100 shares at $100, buy 1 put (strike $95) paying $2.50, sell 1 call (strike $105) receiving $2.50, commissions $1/contract. Net premium ≈ commissions net; breakeven remains near $100.

Zero-cost target: if you want a zero net premium, the tool's optimizer estimates the short-call premium required to offset put cost, ignoring market liquidity and rounding to permitted option increments.