260  •   The Intelligent Option Investor
I show a couple of examples below that give you the flavor of the 
possibilities of the collar strategy. With these examples, you can experi-
ment yourself with a structure that fits your particular needs. Look on 
my website for a collar scenario calculator that will allow you to visualize 
the collar and understand the payoff structure given different conditions. 
For these examples, I am assuming that I bought Qualcomm stock at  
$55 per share. Qualcomm is now trading for $64.71—an unrealized gain 
of 17.7 percent.
Collar 1: 169 Days to Expiration
Strike Price ($) Bid (Ask) Price ($)
Sold call 65.00  3.40
Purchased put 60.00 (2.14)
Net credit $1.26
This collar yields the following best- and worst-case effective sell prices 
(ESPs) and corresponding returns (assuming a $55 buy price):
ESP ($) Return (%)
Best case 66.26 20.5
Worst case 61.26 11.4
Here we sold the $65-strike calls for $3.40 and used those proceeds to 
buy the $60-strike put options at $2.14. This gave us a net credit of $1.26, 
which we simply add to both strike prices to calculate our ESP . We add the 
net credit to the call strike because if the stock moves above the call strike, 
we will end up delivering the stock at the strike price while still keeping the 
net credit. We add the net credit to the put strike because if the stock closes 
below the put strike, we have the right to sell the shares at the strike price 
and still keep the net credit. The return numbers are calculated on the basis 
of a $55 purchase price and the ESPs listed. Thus, by setting up this collar in