A collar moves with the index between two strikes and is fixed outside them
On 10 Jun 2026 the 30 Jun Nifty chain had three prices that matter for a hedge: the future, a put below it and a call above it. The chart joins them into one collar on one lot of 65 units, priced at that day's settle prices.
A covered call is a long future with a short call above it. The seller collects the call premium, which cushions a small fall. The cost is the cap: above the call strike the gain stops, while a larger fall still loses point for point once the premium has been used up.
A protective put is a long future with a long put below it. The put sets a floor, and below its strike the loss stops growing. The premium is paid whether or not the index falls, so the floor has a running cost.
A collar is the two together: a long future, a long put and a short call. The call premium pays for part of the put, so the net cost is lower than the put alone. The position moves with the index between the two strikes and is fixed outside them.
Two limits apply. The chart uses synthetic positions at expiry and leaves out time, margin and costs. Whether a hedge fits a holding, and how large it should be, is a question this page does not answer. The payoff builder lets you change the strikes and see the result.
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