Collar

A collar, commonly known as a hedge wrapper, is an options strategy implemented to protect against large losses, but it also limits large gains. An investor creates a collar position by purchasing an out-of-the-money put option while simultaneously writing an out-of-the-money call option. The put protects the trader in case the price of the stock drops. Writing the call produces income (which ideally should offset the cost of buying the put) and allows the trader to profit on the stock up to the strike price of the call, but not higher.