How Can an Investor Offset the Cost of a Protective Put? ▴ Learn

How Can an Investor Offset the Cost of a Protective Put?

An investor can offset the cost (premium) of a Protective Put by simultaneously selling a Call Option on the same underlying cryptocurrency, creating a 'collar' strategy. The premium received from selling the Call can partially or fully cover the premium paid for the Put, resulting in a low-cost or zero-cost hedge.

This trade-off means the investor limits their upside profit potential but gains downside protection at a reduced or zero net cost.

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Is a Net-Credit Collar Generally Preferred over a Zero-Cost Collar?

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