---
title: "Collar and Put Spread Hedge on Nifty, What They Cost"
description: "Put spreads and collars on dated NSE Nifty chains: what each saves in premium, what it gives up in a fall and in a rise, and why zero cost still has a price."
source_url: "https://www.rupeecase.com/learn/path-17/module-17-14-collars-and-put-spreads"
---

[Path 17 14 of 23](/learn/path-17/)Collars and put spreads as cheaper hedges[Next 17.15](/learn/path-17/module-17-15-hedging-mutual-fund-portfolios)

Monday 2 Feb 2026. The March Nifty future settled at 25,297.40. A put 2.0% below it, the 24,800, cost 291.95 a unit, which is Rs 18,977 a lot. Two other ways to hold cover cost far less. A put spread cost 161.70 a unit. A collar brought in 1.05. On Monday 30 Mar Nifty closed at 22,331.40, 11.7% under that future. One lot of the bare future lost Rs 1,92,790. With the put the loss was Rs 51,308, with the put spread Rs 1,51,301 and with the collar Rs 32,263. Cheaper cover is different cover, not the same cover at a discount. This lesson shows what each one gives up for the saving. All three sit on a position already held, here a lot of the Nifty future. Every figure is from NSE end of day files and dated, so nothing is live and none of it is a view on where Nifty goes.

3By the end you can

1. Draw the payoff of a put spread hedge and of a collar on a held Nifty future, with the cover and the ceiling marked.
2. Work out the cost, the floor and the ceiling of each from dated NSE settlement prices.
3. Say why a zero cost collar still costs something, and why its call strike sits near the money.

Watch in the terminal: why do the hero, key figure and XIRR differ? A short tutorial on sample data.

## The idea, plainly

A plain put is a policy with no limit below its strike, and the premium is its price. Cheaper cover cuts that price by cutting something from the policy. A put spread cuts the cover below a second, lower strike. A collar cuts the gains above a call strike. Either way the saving is paid for somewhere else, and the work is to find where. The covered call and the plain protective put are in [covered call, protective put and cash secured put](/learn/path-17/module-17-3-covered-call-and-protective-put).

### What is a put spread hedge?

The holder keeps the future and buys a put, as in a plain hedge. The holder also sells a put at a lower strike. On 2 Feb 2026 the bought 24,800 put cost 291.95 and the sold 24,000 put paid 130.25, so the pair cost 161.70, 44.6% less than the bare put. The pair pays at most 800 points, the gap between the strikes. Below the lower strike the sold put loses as fast as the bought put gains, and the loss on the future starts again, point for point. The sold put sits against a bought put and a held future, so it is one leg of a hedge. A put sold with nothing underneath it is a different position, and this lesson does not cover it. RupeeCase's own [hedging page](/hedging) sets the same limit: insurance on what is already held.

Put spread hedge
Cover = upper strike
− lower strike
Cost = put bought
− put sold

A put spread covers 800 points of fall, then the loss starts again

One lot of the March future bought on 2 Feb 2026, the 24,800 put bought and the 24,000 put sold, payoff at expiry on 30 Mar 2026. The pair cost 161.70 a unit. Source: NSE end of day data, computed by RupeeCase. As of 2 Feb 2026.

### What is a collar, and what makes it zero cost?

A collar adds a sold call to the bought put. The call premium pays for the put, and in exchange the holder gives up the gains above the call strike. Pick the call whose premium matches the put and the collar is called zero cost. On 2 Feb 2026 the sold 25,700 call paid 293.00, a little more than the 291.95 the put cost, so the holder took in 1.05 a unit. The first 2.0% of any fall stayed with the holder, and gains stopped 1.6% above the future. The held future covers the call, so the call adds no loss beyond the upside already given up. Zero cost means no premium. It does not mean no cost, since the price is the upside above 25,700.

Collar
Floor = put strike
Ceiling = call strike
Net cost = put paid
− call received

A zero cost collar fixes a corridor around the future

The future, the 24,800 put bought and the 25,700 call sold, payoff at expiry on 30 Mar 2026. The put cost 291.95 and the call paid 293.00 a unit. Source: NSE end of day data, computed by RupeeCase. As of 2 Feb 2026.

### Are they cheaper hedges?

Cheaper in premium, yes: 161.70 for the spread and 1.05 received for the collar, against 291.95 for the plain put. Cheaper in what the holder gives up depends on the month. The next section shows a fall in which the collar lost least of the hedged positions and the spread lost most, and a rise in which the collar earned least.

Puts below the future were priced richer than calls above it

Implied volatility of the out of the money option at each traded strike, Black 76 on the settlement prices. The 24,800 put sat at 12.9% and the 25,700 call at 11.8%. Source: NSE end of day data, computed by RupeeCase. As of 2 Feb 2026.
Read one more paragraph, 112 words
Why did the zero cost call sit so near the money? On index options, puts usually cost more than calls at equal distance from the future. On 2 Feb 2026 the 24,800 put was priced at an implied volatility of 12.9% and the 25,700 call at 11.8%. A dearer floor needs a bigger call premium to pay for it, so the zero cost call lands nearer than the put's mirror image would. The lesson on [smile and skew](/learn/path-16/module-16-7-volatility-smile-and-skew) explains why that tilt exists. Margin is set on the whole position, so a sold leg held against a bought leg needs less than the sold leg alone: see [margins without jargon](/learn/path-12/module-12-5-fo-margins-explained).

## Worked example: one lot, a fall and a rise

The holder has one lot of the future, 65 units, in both windows. The fall runs from 2 Feb to 30 Mar 2026, 56 days. That expiry settled on the index close, the rule for expiries before 7 Dec 2026. The strikes are the 24,800 put bought, the 24,000 put sold for the spread and the 25,700 call sold for the collar. Premiums in the table are rupees a unit paid or received, results are rupees for the lot.

| Fall, one lot | Net premium | Result |
| --- | --- | --- |
| Future alone | None | −Rs 1,92,790 |
| Put 24,800 | Pay 291.95 | −Rs 51,308 |
| Put spread | Pay 161.70 | −Rs 1,51,301 |
| Collar | Get 1.05 | −Rs 32,263 |

The put spread saved the premium and left most of the loss

Loss in lakh of rupees on one lot of 65 units. The collar's call premium offset part of the loss, and the spread stopped paying at 24,000. Source: NSE end of day data, computed by RupeeCase. As of 30 Mar 2026.
Nifty fell through both strikes, so the spread stopped paying at the lower one

Daily close of the Nifty 50. The upper line is the bought put and the lower line the sold put of the spread. Source: NSE end of day data, computed by RupeeCase. As of 30 Mar 2026.

| Rise, one lot | Net premium | Result |
| --- | --- | --- |
| Future alone | None | Rs 40,667 |
| Put 22,800 | Pay 158.80 | Rs 30,345 |
| Put spread | Pay 119.30 | Rs 32,913 |
| Collar | Get 12.20 | Rs 24,187 |

Read 3 more paragraphs, 268 words
The bare future lost Rs 1.93 lakh. The put cut that to Rs 0.51 lakh. The spread cut it only to Rs 1.51 lakh: Nifty fell far below the lower strike, as the chart shows, and the loss on the future ran again from 24,000 down. The collar lost Rs 0.32 lakh, the same floor as the put with 293.00 of call premium kept on top.

Now the rise. On 10 Jun 2026 the June future was 23,240.10, with 20 days to run. The same recipe gave a 22,800 put bought at 158.80, 1.9% below the future, a 22,000 put sold at 39.50 and a 23,600 call sold at 171.00, 1.5% above it. On 30 Jun Nifty closed at 23,865.75, 2.7% above the future.

The rise reverses the order. The bare future earned most, the spread gave back its smaller premium, and the collar earned Rs 16,481 less than the future because the sold call took every point above 23,600. Two windows show the shape and say nothing about how often either happens. All prices are settlement prices, before brokerage. Charges come on top. The bought 24,800 put was exercised in the money on 30 Mar and paid STT of Rs 201 on its intrinsic value. A sold option pays STT on its premium when sold: Rs 8.47 for the spread's 24,000 put and Rs 19.05 for the collar's call, at the rate then in force. From 1 Apr 2026 both rates are 0.15%, so the same hedge costs more to run after that date. See [the real cost of a trade](/learn/path-12/module-12-6-cost-of-an-fo-trade).

## The common mistake

The belief: A zero cost collar is a free hedge. Test it on the rise. The collar took in 12.20 a unit of net premium and still earned Rs 16,481 less than the bare future, because the call gave away every point above 23,600. The cost was real and arrived as forgone gains. The spread has its own version: it looks like the same cover for less, yet in the fall it left a loss of Rs 1,51,301 against Rs 51,308 for the plain put. Cheaper cover is paid for with a gap, a ceiling or both. The question to ask of any hedge is which loss it leaves and which gain it removes, before reading the price.

## Key takeaways

* A put spread cuts the premium by ending the cover at a lower strike.
* Below the lower strike the holder carries every point of the fall again.
* A collar sells the gains above a call strike to pay for the put.
* Zero cost means no premium. The upside above the call is the price.
* Index puts usually cost more than calls at equal distance, so the call sits close.
* Both hedge a position already held. Neither is a view.

The term this section turns on: Collar

From the module glossary; every term is in the Learn glossary too. Source: Module 17.14, Collars and put spreads as cheaper hedges.

Watch in the terminal: how does the app call a stock large or small? A short tutorial on sample data.
**Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html)

What does Collars and put spreads as cheaper hedges cover?Cheaper cover is different cover. Two ways to cut the premium of a put, and what each one takes out of the hedge. It works through The idea, plainly, Worked example: one lot, a fall and a rise, The common mistake, Key takeaways. It is module 17.14 of Path 17, Strategies and Hedging, about 9 minutes of reading, free.

TTry it

## Payoff builder, on the same example.
Legs from a dated chain, the expiry and before expiry curves, breakevens and the charges. Dated NSE end of day data, nothing live, no orders.

**Payoff builder**, Nifty, 2 Feb 2026, 30 Mar 2026 expiry.

[Open the payoff builder](/learn/tools/payoff-builder?chain=NIFTY_2026-02-02_2026-03-30&preset=collar)

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  [No hedgeFalls with the marketWith a putA floor, for a premiumIllustration with made up numbers, not a product and not a recommendation.](/hedging)

QQuick check

## 10 questions, 7 to pass.
Each attempt draws 10 of the 15 questions in this module's bank, and a retake draws a fresh set. A pass gives this module's Certificate of Completion. Your result stays on this device and counts towards the Path 17 certificate.

7 of 10 correct passes module 17.14

Every answer is explained when you check; a retake is always free. Source: RupeeCase Learn quiz rules (70% to pass).

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CCheck yourself

## Path 17 so far.
Your quick check results on this device, stop by stop.

Stop 14 of 23 on Path 17

Strategies and Hedging: every live stop, this module ringed. Source: RupeeCase Learn, Path 17.

1. [17.1Reading and building payoff diagramsNot yet](/learn/path-17/module-17-1-payoff-diagrams)
2. [17.2Vertical debit spreads: bull call and bear putNot yet](/learn/path-17/module-17-2-bull-call-and-bear-put-spreads)
3. [17.3Covered call, protective put and cash secured putNot yet](/learn/path-17/module-17-3-covered-call-and-protective-put)
4. [17.4Why and when to hedge: insurance in plain numbersNot yet](/learn/path-17/module-17-4-why-hedge)
5. [17.5Straddles and strangles, long and shortNot yet](/learn/path-17/module-17-5-straddles-and-strangles)
6. [17.6Credit spreads: bull put and bear callNot yet](/learn/path-17/module-17-6-credit-spreads)
7. [17.7Iron condor and iron fly on NiftyNot yet](/learn/path-17/module-17-7-iron-condor-and-iron-fly)
8. [17.8Butterflies and broken wing butterfliesNot yet](/learn/path-17/module-17-8-butterflies)
9. [17.9Option calendar spreadsNot yet](/learn/path-17/module-17-9-option-calendar-spreads)
10. [17.10Choosing a strategy by view: direction, volatility and timeNot yet](/learn/path-17/module-17-10-strategy-by-view)
11. [17.11Adjustments: what they really do to riskNot yet](/learn/path-17/module-17-11-option-adjustments)
12. [17.12Expiry day: gamma, theta, settlement and the rulesNot yet](/learn/path-17/module-17-12-expiry-day)
13. [17.13Hedging a stock portfolio with Nifty putsNot yet](/learn/path-17/module-17-13-hedging-with-nifty-puts)
14. [17.14Collars and put spreads as cheaper hedgesNot yet](/learn/path-17/module-17-14-collars-and-put-spreads#quiz)
15. [17.15Hedging mutual fund portfolios: beta and basisNot yet](/learn/path-17/module-17-15-hedging-mutual-fund-portfolios)
16. [17.16Ratio spreads and backspreadsNot yet](/learn/path-17/module-17-16-ratio-spreads-and-backspreads)
17. [17.17Diagonals and double calendarsNot yet](/learn/path-17/module-17-17-diagonals-and-double-calendars)
18. [17.18P&L attribution by GreeksNot yet](/learn/path-17/module-17-18-pnl-attribution-by-greeks)
19. [17.19Event hedging with event varianceNot yet](/learn/path-17/module-17-19-event-hedging)
20. [17.20Tail hedging and long dated Nifty optionsNot yet](/learn/path-17/module-17-20-tail-hedging)
21. [17.21Hedging an option selling book: wings, vega, gaps and margin stressNot yet](/learn/path-17/module-17-21-hedging-an-option-selling-book)
22. [17.22Kelly and sizing for option strategiesNot yet](/learn/path-17/module-17-22-kelly-sizing)
23. [17.23Risk for option books: scenarios, stress, VaR, ES and margin shocksNot yet](/learn/path-17/module-17-23-option-book-risk)
24. [TPath test, 30 questionsNot yet](/learn/path-17/module-17-23-option-book-risk#pathTestSection)

Path 17 in reading time: 215 minutes over 23 modules

Minutes of reading per module, this one in amber. Source: RupeeCase Learn, Path 17.

    Explore next

## Put the module to work.

* [Free module 17.1Reading and building payoff diagrams7 min read](/learn/path-17/module-17-1-payoff-diagrams)
* [Free module 17.3Covered call, protective put and cash secured put8 min read](/learn/path-17/module-17-3-covered-call-and-protective-put)
* [Free module 17.4Why and when to hedge: insurance in plain numbers8 min read](/learn/path-17/module-17-4-why-hedge)
* [Free module 17.13Hedging a stock portfolio with Nifty puts9 min read](/learn/path-17/module-17-13-hedging-with-nifty-puts)
* [Free module 16.7Smile and skew: a first look at Nifty and stocks8 min read](/learn/path-16/module-16-7-volatility-smile-and-skew)
* [Free module 17.15Hedging mutual fund portfolios: beta and basis9 min read](/learn/path-17/module-17-15-hedging-mutual-fund-portfolios)

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SSources

## Go to the source.
7 sources, NSE the most cited

The publisher of each source listed below. Source: Module 17.14 source list.
1. [NSE, equity derivatives contract specifications (lot size, strikes, cash settlement of index options)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE
2. [NSE Clearing, margins: SPAN, initial margin and extreme loss margin](https://www.nseclearing.in/risk-management/equity-derivatives/margins) NSE
3. [NSE, securities transaction tax on equity derivatives](https://www.nseindia.com/static/products-services/equity-derivatives-securities-transaction-tax) NSE
4. [SEBI Investor, Understanding derivatives (hedging with derivatives)](https://investor.sebi.gov.in/understanding_derivatives.html) SEBI
5. [NISM, Series VIII Equity Derivatives, test objectives (option strategies and hedging)](https://www.nism.ac.in/revamp-nism/test-objectives-revised-nism-series-viii-equity-derivatives-certification-examination/) NISM
6. [Israelov, R. and Nielsen, L. N., Covered Calls Uncovered, Financial Analysts Journal, 2015](https://doi.org/10.2469/faj.v71.n6.1) Paper
7. Hull, J., Options, Futures, and Other Derivatives, Pearson (trading strategies involving options) Book

GTerms

## 5 terms from this module.
Put spread hedgeA bought put and a sold put at a lower strike, held against a position. It costs less than the bought put alone and pays only between the two strikes.
CollarA held position with a bought put below and a sold call above, so the loss and the gain both stop at fixed levels.
Zero cost collarA collar whose call premium equals the put premium, so no net premium is paid. The price is the gain given up above the call strike.
CorridorThe range between the put strike and the call strike inside which a collared position moves with the index.
[Skew](/learn/glossary#skew)The tilt in implied volatility across strikes. In index options the puts below the future usually carry higher volatility than the calls above it.
[All 230 terms in the glossary](/learn/glossary)

[Question people askCovered call, protective put and collar: how do they work?A short answer with a dated chart](/learn/questions/covered-call-protective-put-collar)[Question people askAre collars and put spreads cheaper hedges?A short answer with a dated chart](/learn/questions/collars-and-put-spreads-cheaper)[Related module17.1 Reading and building payoff diagrams7 min, Beginner](/learn/path-17/module-17-1-payoff-diagrams)[Related module17.3 Covered call, protective put and cash secured put8 min, Beginner](/learn/path-17/module-17-3-covered-call-and-protective-put)[Pillar guideDerivatives and Quant115 modules across paths 12 to 19](/learn/derivatives)

Education only, not investment advice, a research report or a recommendation to buy, sell or hold any security. RupeeCase (QC Alpha Technologies Pvt Ltd) is not registered with SEBI as an investment adviser or research analyst. Contracts and prices shown are for illustration only, come from NSE end of day files at least 30 days old, and are not recommendatory. Derivatives trading carries a high risk of loss.