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No. of Recommendations: 2
This is something I've been playing around with and so far it looks pretty good on paper and in practice on the few positions I've used it.

What is a collar?

It's long stock, long put, and short call. You've essentially defined your upside and downside.

Now here's how I've changed the position. Instead of going long stock, you substitute a very far dated deep ITM call. The delta on the call should be at a minimum .75 and preferably around .8 to .85. The call should have minimal extrinsic value. Essentially, the call functions as a leveraged stock clone.

First let me say that obviously for this trade to be successful on average you need to be a good stockpicker, but my analysis shows that this position is superior to the conventional collar in almost all ways. Your max % gain to the upside is greater because the % gain on the long call is greater than the % gain on holding stock. The downside can even be better. Let me illustrate that by demonstrating the worst case scenario. Let's say the company goes bankrupt and the stock goes to 0. For the long stock collar, the put gains will more or less equivalently offset the stock losses. But for the long call collar, at some point the long call losses will decrease (due to the shrinking delta) and at most you'll lose the entire call premium while the put is still gaining. You could actually be profitable if you are completely wrong and the stock tanks.

There is a gray area in the middle where you are worse off, as the long call is experiencing some time decay (but not much as it is deep ITM) and long stock would not.

Bottom line, from what I can see this is a way to be leveraged, yet also protected.

Comments welcome.
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