Collar Strategy A basic strategy for protecting a stock position is the purchase of protective put options. In return for the payment of the option's premium, the investor obtains protection from the risk of price movement below the put's strike price. The combined position allows the investor to participate in any possible upside profits on the original stock position, less the cost of the puts. But one problem facing investors who wish to use this protection is that the cost of the puts can sometimes be prohibitive. If so, investors should consider employing equity options for portfolio management.
Investors can protect the value of their equity holdings by purchasing put options.