Collar Buying

This is when you own shares in a particular stock and then you sell Calls against it and then buy Puts.

You would use this strategy when you think that the stock rice is a little overdone and you are expecting some downside. This has limited risk due to the long put option, but also limited upside due to the short calls.

Here is an example of what it would look like:

Own 1000 Shares of Goldman Sachs (GS)

Then Sell To Open 10 GS AUG 300.00 Calls

Then Buy To OPEN 10 GS 250.00 PUTS

This is another type of spread trade