Collar (against futures)

Also called: Fence

Long futures, a bought put below and a sold call above: the call premium pays for the put, and the position is boxed between the two strikes.

Payoff sketch (per unit, index points)

At expiry

Today (7 days left)

Net premium

Credit 22 pts

Max profit

+191 pts (₹12,388 per lot)

Max loss

−209 pts (₹13,612 per lot)

Breakeven

25,009

Legs: Buy futures · Buy PE ATM −200 · Sell CE ATM +200. Illustration, not live prices: an index at 25,000, strikes 100 points apart, Black-Scholes premiums at 13% implied volatility, 7 days to expiry, 6.5% interest, no skew and before charges. Rupees per lot use a NIFTY lot of 65.

How it works

A protective put financed by a covered call. Below the put strike the loss stops; above the call strike the gain stops.

At expiry the payoff matches a bull call spread between the same strikes.

When traders use it

Protecting a long position cheaply when the holder is willing to give up gains above a level.

Greeks

Delta	Positive, reduced by both options.
Gamma	Small; positive near the put, negative near the call.
Theta	Small; depends on which option is nearer the money.
Vega	Small.

Profit, loss and margin

Max profit	(Call strike − futures entry + net option credit, or − net debit) × quantity, above the call strike.
Max loss	(Futures entry − put strike − net option credit, or + net debit) × quantity, below the put strike.
Breakeven	Futures entry − net option credit (or + net debit).
Margin	The futures margin, usually reduced by the hedge.

In India

Futures are marked to market daily and need SPAN plus exposure margin; STT is charged on the sell side (0.05% from 1 April 2026 in Arthfy's cost model). Index futures expire monthly.
SPAN margins the whole position, so a defined-risk spread usually blocks far less than its short leg alone. Brokers grant the hedge benefit only when the protective leg is actually in the account, which is why the long leg is usually placed first.
A long option that finishes in the money is exercised automatically. STT is then charged on its intrinsic value at the exercise rate (0.15% from 1 April 2026 in Arthfy's cost model), instead of the sale rate on the premium (also 0.15%) that applies when the option is sold before the close. See the lesson on the STT exercise trap.

Arthfy numbers

At expiry this has the payoff of a bull call spread; Arthfy's history of that shape is on the bull call spread page. See Bull call spread.

Try it in the F&O hub

Opens the tool with this structure on today's NIFTY chain. Reading is free with an Arthfy account; some runs use free attempts.

Open in the builderPayoff, Greeks, scenario grid and charges on today's NIFTY chain

Open the option chainLive premiums, IV and Greeks

Vertical spreads

Bull call spread

Hedges with futures

Protective put (against futures)