I’ve written here recently about how I use technical analysis data from Barchart to help me study charts. I call the outcome of this process the Reward Opportunity and Risk (ROAR) score, and it has been a valuable tool in my own investing. It helps me steer clear of big trouble and gives me key insight into stocks and ETFs. But investing is not just about “what” you want to own and “when” you want to own it. There's another critical step you must take before hitting the buy button. 

How Are You Making That Stock Purchase? 

We are all taught to buy shares of a stock, hold it, then sell it. That’s the natural lifecycle of a stock position. 

However, once you own something, you now have all the risk that comes with stock ownership. If there was ever a time when this was front of mind, it is right here, right now, in 2025. Moves of 20%-40% up and down have already been part of this year’s scenario for many stocks. That might cause some investors to ask, “is there another way to try to profit from this stock, but without wrecking my portfolio if it goes way south?”

Introducing the collar: a 3-piece suit for a stock idea.

A collar simply involves three related transactions:

1. Buy 100 shares of the stock (since option contracts represent “round lots” of 100 shares each).
2. Buy to open 1 put option for every 100 shares of stock purchased.
3. Sell to open 1 call option for every 100 shares of stock purchased.

This creates a “collar” around the stock’s price movement. The goal is to define at that moment the worst-case scenario for the stock holding. Not after it implodes on earnings, or slides down with the broad market. It creates a line in the sand that runs through the option’s expiration date.

The call options are “covered” in that the stock is owned, and thus by itself, the call option premium received represents cash flow in exchange for capping the upside potential of the position. Spoiler alert: I can just buy more stock if the shares I own are called away down the road. The call premium also serves to offset the cost of the put protection underneath the stock.

Using Barchart to Identify Option Collar Strategies 

Option collars can be applied to any stock that has a liquid options market. And, as with my ROAR score, my go-to for information to analyze stocks to collar is Barchart. The option information is teed up, and I can even use screeners to quickly find the characteristics of a collar that I am looking for. Importantly, there are an infinite number of combinations one can apply to any stock, be it the strike prices of the options or the expiration date. 

The strategy each investor uses is also as customizable as their imagination allows. I am a semi-retired investor that prioritizes avoiding big losses over everything else. So my collar approach is focused on allowing me to be much bolder than I would be if I were buying the stock “naked.”

Here’s an example using the popular Nvidia (NVDA). The stock is volatile, as we have witnessed all year. Some investors love volatility, others fear it. I just try to exploit it for my benefit. 

This example is one of literally thousands that a trader can filter down to using Barchart’s option screener.

How to ‘Collar’ Nvidia Stock 

NVDA was a $134 stock as of market close on May 15. If I bought 100 shares, that would cost about $13,400. 100 shares of a $30 stock would cost $3,000, etc. 

This particular collar combination has both option pieces going out to Dec. 19, 2025, so just about through year-end. Put and call options around a stock don’t have to expire on the same date. It just means the holder might have to make a decision on one “leg” of the position before the other.

Highlighted in yellow are the option strike prices. The calls are “struck” at $155 a share. That means the most I can make on NVDA is $155 without doing something. If it flies higher to above $155, I could be forced to sell the stock. But there are many ways to continue having NVDA exposure, including resetting the collar or simply buying more stock.

Barchart indicates “Short” above that call option level because it is explaining that if I did not own NVDA stock, that call would act like a short position, since I sold the calls, brought in cash, but don’t have the stock to deliver if I am forced to above $155 a share. 

However, in this example, I do own 100 shares of NVDA, exactly what I need to transact if I am so fortunate to be asked to sell a stock at $155 that trades at only $134 now.

The put options are struck at $124. To a very conservative investor like me, this is the reason I put collars around many of my large stock and ETF positions. I want to know right now what my worst-case scenario is. Stop orders don’t do that, since a stock can jump right under that stop level on an earnings miss or other disruptive event. So to me, stop orders only stop one thing: profits!

In this example, the premiums on the put and call options are almost the same. That means whatever I make by selling the call above $155 would cover the cost of the put hedge, or the insurance against the stock price declining below $124. 

Make a Lot or Lose a Little? Both Are Better Than the Alternative. 

So let’s add it all up. A stock at $134, I can’t lose below $125, and I can’t win above $155. Except that the loss side is concrete unless I sell the put, and as noted above, the calls I sold can be unwound (“rolled”) to a higher strike price, a different expiration date, or both. It might cost me some of the gains I’ve had up toward that higher price level, but that’s a high class problem. 

Barchart adds up the potential best and worst case for us in dollar terms above. They also show them in percentage terms. However, keep in mind that if call proceeds received and option cost paid do not equal each other, the net cost of the options needs to be subtracted from those percentage terms. 

Here, the bottom line is that I would now have 15.7% upside in NVDA through mid-December, and my maximum downside risk is 7.4%. So a 2:1 ratio, which is not bad.

Collars are so customizable that every day I find ratios of 4:1 and higher on a wide range of stocks and some ETFs. And Barchart’s slick and efficient approach to all of this makes it my go-to collar analysis research tool.