Collar Strategy: A smart, structured approach to protecting your wealth and building diversification.
At Abbey Street, a common concern we hear from prospective clients is this:
“I have too much of my wealth tied up in one stock, and I don’t know what to do about it.”
Whether it’s from founding a business, being an early employee at a successful company, or simply holding a long-term position that’s grown significantly, concentrated stock risk is real — and can be unsettling.
Clients often ask:
One strategy we use in these situations is the collar.
A collar is an options-based technique that helps limit the downside risk of a stock — while also capping the upside. It can be used to help lock in a value range and create clarity in an otherwise unpredictable market.
Here’s how it works:
Because the premium earned from selling the call can offset the cost of the put, collars can often be implemented at low or even no net cost.
A Simple Example
Let’s say you hold $1 million of a stock currently trading at $105. You’re concerned about volatility but not ready to sell. You could:
If the stock drops below $95, the put helps preserve your value. If it rises above $115, you may be required to sell — but at a gain. In either case, you’ve created a controlled outcome.
A collar offers more than just downside protection — it unlocks additional planning strategies:
For many of our clients, collars serve as a transition tool — giving them the confidence to move from a concentrated position toward a more diversified, resilient wealth plan.
When Is It a Good Fit?
A collar strategy is most effective when:
Options strategies like collars are not “do-it-yourself” planning. They involve:
At Abbey Street, we specialize in helping clients manage complex wealth situations. If you’re facing concentrated stock risk and want to explore how a collar — or another strategy — could support your goals, we’re here to help.
If you’re ready to create stability, reduce risk, and start building toward diversification, schedule a conversation with our team.
Investopedia.com –https://www.investopedia.com/terms/c/collar.asp
Start a conversation to learn more about who we are and what we do. Our team is ready to make an impact.
Contact Us