Collars are very effective in squeezing out additional profits during downturns in your stocks, but I think the primary thing we as traders and investors have to keep in mind is the fact that patience is a virtue and that sometimes we can be wrong. Now, what the hell does that have to do with collars? Well, for starters, you're never gonna be right 100% of the time and what is the measure of the trader/investor (and eventually his/her account) is knowing when you ARE GOING TO BE wrong (notice, not when you are already wrong) and adjusting/accepting your circumstance. If you don't marry your stocks/positions, then collars can be used to their greatest advantage. First of all, collars (in my experience) are most effective when you have a good understanding of the underlying and how it moves and also have DEVELOPED AN EDGE when it comes to trading and investing in it. Usually I have little to no problems placing collars on issues I have owned for long periods of time and are comfortable with. The reason I know I can be successful using collars on those issues are: 1.) Extensive familiarity with the issue and developed fundamental/technical analysis surrounding it. (my edge) 2.) Confidence in the fact that I know if I am patient enough the issue will always provide me an opportunity for re-entry. 3.) The discipline to know that stocks don't/can't love me back and are just vehicles to garner more financial resources with which I can attain goals. You see this horribly esoteric answer is necessary in order to provide your questions sufficient answers because you really are not asking about collar strategies. Rather, you are having problems with some fundamentals regarding trading in general. You see, each and every strategy has advantages and disadvantages as well as times when one approach will reap more rewards than others. The simple answer to your question about how not to pay too much for insurance is easy to answer. The basic implementation of the collar strategy offsets your cost for "insurance". I refuse to really call it insurance since I see it more as locking in profits and profiting more on downswings. If you are finding yourself unable to sell calls at the time that you are buying puts, well then you are using some other strategy than a collar. Secondly, how not to have your stocks get called away, well that could possibly be the easiest to answer. Simply put, you have to either unwind the collar at a cost in order to keep your stock, or you must let it go. It's a part of the life of trading. Sometimes you have to sell and take profits, otherwise you are not trading, you're betting and by the sounds of it you are losing some of those bets. You see, if you have your edge developed and are disciplined as a TRADER, then you will know when to collar a stock and usually you will do just fine. Yes, sometimes the strategy will not work as best is should or could have, but hey we are all human. Remember, if you are finding yourself hesitating on one side of the collar execution strategy, then you are not collaring a stock. If you are just buying puts without selling the offsetting calls, then you are simply buying insurance, and we all know that insurance is expensive until you need it. I think maybe you are more unsure of when to use a collar on a particular equity than on how to buy "cheap insurance" and avoid "losing" your stocks. Remember, to everything there is a season. In options, to every situation there is a strategy. The trick is choosing the correct one and then executing. Happy trading/investing
I have all of his four book, time spreads, one strategy for all markets, greeks for profits and collars. want to trade?.