This position can be adjusted during the life of the contract depending on one's outlook on the underlying stock. If the stock drops sharply near term, the puts can be sold and the calls bought back to cover if you think the stock has quick recovery potential. On the upside, if the stock moves to the call strike and you've turned more positive, then you can roll the call up and out. Lifting one or both legs of collar can affect the profit or loss potential of the overall position. You may be able to employ a hedgewrapper for six months for not much more cash outlay than for three months.
Many investors use the hedgewrapper strategy to move profits into the next taxable year.
Using closer strikes could run afoul of unclear tax rules. An early assignment of the short call would leave a long put, which could be sold or, if exercised, would result in a short stock position. Buying Index Puts This is the least popular of the hedging strategies, and for good reason. Most investors will purchase index puts for one or two months and watch them expire worthless. This can be very costly.