--- title: "Are collars and put spreads cheaper hedges | RupeeCase" description: "A collar buys a put and pays for it by selling a call, so the net cost is lower." source_url: "https://www.rupeecase.com/learn/questions/collars-and-put-spreads-cheaper" --- A collar holds the index between a put floor and a call cap, and the sold call pays for the put Profit and loss at expiry for one lot: a long future, a bought put and a sold call, at the settle prices of 10 Jun 2026. Outside the two strikes the line stops moving. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026. Cheaper here means a lower premium paid, not less risk. A collar on an index holding has three parts: the holding or a long future, a bought put below the market, and a sold call above it. The call's premium pays for the put, so the net cost falls, and the profit and loss are held between a floor and a cap at expiry. Above the call strike the gain stops growing, and below the put strike the loss stops growing. Those flat parts are what the cheaper cost gives up. The chart draws one lot of that collar at the settle prices of 10 Jun 2026. A put spread is different. You buy one put and sell a second put at a lower strike. The cover builds between the two strikes and stops growing below the lower one, so a fall past the lower strike adds no more cover. Its net premium is lower than a single put, and the gap is what you give up below the lower strike. Count every cost. STT applies at 0.15% on each option premium sold and on the intrinsic value of an exercised option, from 1 Apr 2026. Exchange and SEBI fees, GST at 18% on brokerage and exchange charges, and the spread on each leg all come off the saving. Compare the net premium with the whole range of outcomes it buys, not with the single bought put alone. The payoff builder below draws any mix of legs on the dated chain. **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) Are collars and put spreads cheaper hedges?A collar buys a put and pays for it by selling a call, so the net cost is lower but the gain is capped above the call; a put spread buys one put and sells a lower strike put, so the cover stops growing at the lower strike. Both are cheaper than a single bought put only because they give up something, so the lower price is not a free hedge. LGo deeper ## Where Learn teaches this. [Go deeperCovered call, protective put and cash secured put8 min, Beginner](/learn/path-17/module-17-3-covered-call-and-protective-put)[Go deeperVertical debit spreads: bull call and bear put8 min, Beginner](/learn/path-17/module-17-2-bull-call-and-bear-put-spreads)[Try itPayoff builderLegs from a dated chain, the expiry and before expiry curves, breakevens and the charges.](/learn/tools/payoff-builder) SSources ## Go to the source. 3 sources, NSE the most cited The publisher of each source listed below. Source: Module undefined source list. 1. [NSE, equity derivatives contract specifications (expiry cycle, lot size and strike rules)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE 2. [SEBI investor education, Understanding derivatives](https://investor.sebi.gov.in/understanding_derivatives.html) SEBI 3. [NSE circular NSE/FATAX/73524 (STT rates from 1 Apr 2026)](https://nsearchives.nseindia.com/content/circulars/FATAX73524.pdf) NSE ?Questions people ask ## Related questions. 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