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Futubull Options Sir
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Nvidia's stock price suddenly retreated? Use options strategies to add a 'protective collar'.

Hello, mooers! I am Sir Options.This week, we present you with 'Know More About Options'.
Yesterday,$Nvidia (NVDA.US)$Suddenly retreated, the intraday stock price dropped nearly 10% to $108, and continued to decline after hours.
Many mooers who already hold positions in stocks may find it difficult.：
Not wanting to immediately sell stocks, hoping to profit when the stock price rebounds, but also worried about continuing to hold positions and bear the risk of further price declines, what to do?
This is where the power of options shines.：
If options strategies are used correctly, you can seek profit more securely while controlling risks.
From the options chain > options analysis holding distribution, it can be seen that many investors preemptively positioned Puts at support levels to hedge against price declines.
Hello mooers! I am Option Sir.[Cool Guy]This week, Options Insight brings you. Yesterday,[Share Link: $Nvidia (NVDA.US)$]Suddenly retraced, the intraday stock price fell nearly 10% to $108, and continued to fall after hours. Many mooers who already hold stocks may find it difficult.[Sob]： If you don't want to sell your stocks immediately and hope to profit when the stock price rises, but also worry about further losses if you continue to hold the stocks and the stock price falls, what should you do? This is where the power of options is manifested.[Trick]： If you use options strategies properly, you can seek profit opportunities more securely while controlling risks. From the options chain & options analysis, you can see that many investors have laid out Puts in advance to hedge the risk of falling stock prices. Take the NVDA $110 Put that expires this week as an example. If you previously bought this option as a "insurance" for a drop in stock price, then when the stock price dropped yesterday, this option rose from the opening price of $0.74 to the closing price of $4.05, achieving a return of 1057%! Although the stock price has dropped significantly, buying Puts can help you reduce some of the losses. Some mooers may wonder at this point.[Shocked]： I understand the reasoning, but the stock price has already dropped.The price of buying Put is too high, what should I do? In this situation, some investors may choose to sell a higher strike price Call while buying Put to reduce the cost of buying Put. And this is...
Taking the example of the NVDA $110 Put expiring this week, if you previously bought this option as an 'insurance' against stock price decline, then on the day when the stock price fell yesterday, this option rose from an opening of $0.74 to a close of $4.05, yielding a return of 1057%!
Although the stock price dropped significantly, buying Puts can help reduce a portion of the losses.
At this point, some mooer may have questions.：
I understand the reasoning, but the stock price has already dropped.The price for buying Put options is too high, what should I do?
In this situation, some investors may choose to sell a Call option with a higher strike price while buying Put options, in order to reduce the cost of buying Put options.
And this is the strategy that Sir wants to introduce to everyone todaythe Long Collar options strategy
The main purpose of this strategy is to limit the maximum loss of the investment portfolio when the stock price drops, while also preserving the ability of the investment portfolio to continue making profits.
Click to enter the NVDA options chain.
1. What is a Long Collar options strategy?
This strategy is mainly composed ofholding the underlying stock + buying Put options + selling Call optionsThese three parts make up the strategy.
It may seem complicated, but it's actually not difficult to understand:
The combination of buying the underlying stock and buying Put optionsforms a Protective Put options portfolio.。
This is equivalent to you spending option money to buy one share.insurance.When the stock price falls sharply, you can exercise put options to sell the underlying stock at the exercise price, limiting the downside risk of the stock price.
Buying the underlying stock and selling a portion of the call option together form a covered call option strategy.Although the buyer of the call option restricts your profit when the stock price rises sharply, you gain the profit from selling the call option.。
Although the buyer of a Call option will restrict your profits when the stock price rises sharply, you will still profit from selling the Call option and receiving the option premium.
When the purchase of the underlying stock + the purchase of Put + the sale of Call are combined, it becomesLong collars options strategy (Long Collar)。
In other words, under the premise of holding stocks, you buy a Put as insurance, while selling a Call to offset the cost of buying the Put.
Although giving up some of the upward profit of the stock, it limits the downside risk of the stock price. This is equivalent to putting a collar on the stock, locking in the stock's returns, and thus the name Long Collar options.collarThe stock's gains are locked in, thus the term Long Collar options.
Some investors will constructSell Call and buy Put options with equal amount of money.combination, the cost of limiting losses is completely offset by the income from selling call options, which is calledzero-cost collar strategy。
Hello mooers! I am Option Sir.[Cool Guy]This week, Options Insight brings you. Yesterday,[Share Link: $Nvidia (NVDA.US)$]Suddenly retraced, the intraday stock price fell nearly 10% to $108, and continued to fall after hours. Many mooers who already hold stocks may find it difficult.[Sob]： If you don't want to sell your stocks immediately and hope to profit when the stock price rises, but also worry about further losses if you continue to hold the stocks and the stock price falls, what should you do? This is where the power of options is manifested.[Trick]： If you use options strategies properly, you can seek profit opportunities more securely while controlling risks. From the options chain & options analysis, you can see that many investors have laid out Puts in advance to hedge the risk of falling stock prices. Take the NVDA $110 Put that expires this week as an example. If you previously bought this option as a "insurance" for a drop in stock price, then when the stock price dropped yesterday, this option rose from the opening price of $0.74 to the closing price of $4.05, achieving a return of 1057%! Although the stock price has dropped significantly, buying Puts can help you reduce some of the losses. Some mooers may wonder at this point.[Shocked]： I understand the reasoning, but the stock price has already dropped.The price of buying Put is too high, what should I do? In this situation, some investors may choose to sell a higher strike price Call while buying Put to reduce the cost of buying Put. And this is...
2. Long Collar construction and application
In the Futubull platform, there are two situations when constructing a Long Collar:
In the case of not holding the underlying stocks, click on 'Collar Option Portfolio' to buy the underlying stocks, buy Put options, and sell Call options simultaneously.
In the case of already holding the underlying stocks, click on 'Single Option' to sell Call options and buy Put options separately.
Choose the specific one based on the mooer's own choice.
Hello mooers! I am Option Sir.[Cool Guy]This week, Options Insight brings you. Yesterday,[Share Link: $Nvidia (NVDA.US)$]Suddenly retraced, the intraday stock price fell nearly 10% to $108, and continued to fall after hours. Many mooers who already hold stocks may find it difficult.[Sob]： If you don't want to sell your stocks immediately and hope to profit when the stock price rises, but also worry about further losses if you continue to hold the stocks and the stock price falls, what should you do? This is where the power of options is manifested.[Trick]： If you use options strategies properly, you can seek profit opportunities more securely while controlling risks. From the options chain & options analysis, you can see that many investors have laid out Puts in advance to hedge the risk of falling stock prices. Take the NVDA $110 Put that expires this week as an example. If you previously bought this option as a "insurance" for a drop in stock price, then when the stock price dropped yesterday, this option rose from the opening price of $0.74 to the closing price of $4.05, achieving a return of 1057%! Although the stock price has dropped significantly, buying Puts can help you reduce some of the losses. Some mooers may wonder at this point.[Shocked]： I understand the reasoning, but the stock price has already dropped.The price of buying Put is too high, what should I do? In this situation, some investors may choose to sell a higher strike price Call while buying Put to reduce the cost of buying Put. And this is...
Without much talk, let's continue to see the effect of the Long Collar through actual operations.
Assuming,You hold 100 shares of NVDA with yesterday's after-hours closing price of108 USDAnd you neither want to close the position now, nor worry about a significant profit rollback due to further decline. You can use the Lead Long Position Options Strategy.
Firstly,You useThe price per share is $0.98.with a strike price of$119and an expiration date of September 13th.NVDA Call；
Hello mooers! I am Option Sir.[Cool Guy]This week, Options Insight brings you. Yesterday,[Share Link: $Nvidia (NVDA.US)$]Suddenly retraced, the intraday stock price fell nearly 10% to $108, and continued to fall after hours. Many mooers who already hold stocks may find it difficult.[Sob]： If you don't want to sell your stocks immediately and hope to profit when the stock price rises, but also worry about further losses if you continue to hold the stocks and the stock price falls, what should you do? This is where the power of options is manifested.[Trick]： If you use options strategies properly, you can seek profit opportunities more securely while controlling risks. From the options chain & options analysis, you can see that many investors have laid out Puts in advance to hedge the risk of falling stock prices. Take the NVDA $110 Put that expires this week as an example. If you previously bought this option as a "insurance" for a drop in stock price, then when the stock price dropped yesterday, this option rose from the opening price of $0.74 to the closing price of $4.05, achieving a return of 1057%! Although the stock price has dropped significantly, buying Puts can help you reduce some of the losses. Some mooers may wonder at this point.[Shocked]： I understand the reasoning, but the stock price has already dropped.The price of buying Put is too high, what should I do? In this situation, some investors may choose to sell a higher strike price Call while buying Put to reduce the cost of buying Put. And this is...
Then,you press the same0.98 USD per shareBought one option with a strike price of $97.us dollar, with the same expiration date of September 13th.NVDA Put.。
Hello mooers! I am Option Sir.[Cool Guy]This week, Options Insight brings you. Yesterday,[Share Link: $Nvidia (NVDA.US)$]Suddenly retraced, the intraday stock price fell nearly 10% to $108, and continued to fall after hours. Many mooers who already hold stocks may find it difficult.[Sob]： If you don't want to sell your stocks immediately and hope to profit when the stock price rises, but also worry about further losses if you continue to hold the stocks and the stock price falls, what should you do? This is where the power of options is manifested.[Trick]： If you use options strategies properly, you can seek profit opportunities more securely while controlling risks. From the options chain & options analysis, you can see that many investors have laid out Puts in advance to hedge the risk of falling stock prices. Take the NVDA $110 Put that expires this week as an example. If you previously bought this option as a "insurance" for a drop in stock price, then when the stock price dropped yesterday, this option rose from the opening price of $0.74 to the closing price of $4.05, achieving a return of 1057%! Although the stock price has dropped significantly, buying Puts can help you reduce some of the losses. Some mooers may wonder at this point.[Shocked]： I understand the reasoning, but the stock price has already dropped.The price of buying Put is too high, what should I do? In this situation, some investors may choose to sell a higher strike price Call while buying Put to reduce the cost of buying Put. And this is...
In this process, the income and expenses of the two options offset each other, allowing you to build a Long Collar option strategy.Combination.
So, after opening the combination, how effective is the protection of the exercise options?
Hello mooers! I am Option Sir.[Cool Guy]This week, Options Insight brings you. Yesterday,[Share Link: $Nvidia (NVDA.US)$]Suddenly retraced, the intraday stock price fell nearly 10% to $108, and continued to fall after hours. Many mooers who already hold stocks may find it difficult.[Sob]： If you don't want to sell your stocks immediately and hope to profit when the stock price rises, but also worry about further losses if you continue to hold the stocks and the stock price falls, what should you do? This is where the power of options is manifested.[Trick]： If you use options strategies properly, you can seek profit opportunities more securely while controlling risks. From the options chain & options analysis, you can see that many investors have laid out Puts in advance to hedge the risk of falling stock prices. Take the NVDA $110 Put that expires this week as an example. If you previously bought this option as a "insurance" for a drop in stock price, then when the stock price dropped yesterday, this option rose from the opening price of $0.74 to the closing price of $4.05, achieving a return of 1057%! Although the stock price has dropped significantly, buying Puts can help you reduce some of the losses. Some mooers may wonder at this point.[Shocked]： I understand the reasoning, but the stock price has already dropped.The price of buying Put is too high, what should I do? In this situation, some investors may choose to sell a higher strike price Call while buying Put to reduce the cost of buying Put. And this is...
If the stock price falls below $97
You can exercise the put option and sell the options you hold for $97.
Even if the subsequent stock price falls to a lower price, you can exit at the stop loss price of $97, limiting the maximum loss to ($97-$108)*100=-$1100;
If the stock price is between $97 and $119
Both options become worthless due to offsetting prices and being out of the money, which is equivalent to simply holding the underlying stock. If the stock price increases slightly, you can still make a profit. In addition to limiting the maximum loss, the protective strategy also maintains the ability to earn returns on the investment portfolio.
When the price of Nvidia rises to the exercise price of $119 for selling the call option, the combination achieves maximum profit, with a profit on the stock of ($119-$108)*100=$1100.
If the stock price rises above $119.
Due to the buyer of the Call option, you need to sell the stocks, so the subsequent profit is not related to you.
Although you cannot receive the full profit in this situation, if your desired take-profit price when building positions is $119, then it is acceptable for you to exit at this time.
3. Tips
Regarding this strategy, there are some small experiences, but it does not apply to all symbols, so please use it as a reference.
A. How to choose the expiration date?
This strategy involves buying Puts and selling Calls.The core objective of the strategyStill forBullish in the long term.providing protection for stocks.
Therefore, choosing the appropriate expiration date should be based on the prediction of the future volatility duration of stock prices.
The general market experience is:
Expecting short-term stock price decline:You can choose a shorter expiration date.
Expecting long-term volatility in stock prices:You can choose a longer expiration date.
B. How to choose the strike price?
In actual strategy construction, you can adjust theexercise price spreadto align with your strategy logic and expectations.
Long Collar still has the potential for losses, so you can adjust the strike price based on your risk tolerance. The general market experience is:
Sell Call:Choose a strike price close to the price at which you would be willing to sell the stock. This means that if the stock price rises to this level, you would be willing to sell the stock at this price.
Buy Put:Choose a strike price within the maximum acceptable loss range you want to lock in. This way, if the stock price drops, your loss will not exceed this price.
Investors usually try to construct a Long Collar with zero or negative cost, and adjust the strike price based on the strategy's cost budget. The general market experience is:
As is well known, whether it is a Call or a Put, the closer the strike price is to the current stock price, the higher the option premium.
As is well known, the closer the strike price of the put and call options to the current stock price, the higher the option premium.
If you want to establish a zero-cost strategy, you can set the Call strike price to be higher thanthe Put strike price closer to the current stock price.。
In this way, the premium received from selling the call may be sufficient to offset the cost of buying the put.
C. What happens when a put or call is in-the-money at expiration of the option?
As the buyer of a put, if the option is in-the-money at expiration, the system will automatically exercise
Auto-exercise conditions:On the expiration day of a US stock option, if the underlying stock price equals or falls below the exercise price of $0.01
The option will be completed by physical delivery. Since you are holding the underlying stocks when constructing a Long Collar, the system will automatically do so during the option exercise settlement.hold the underlying stock, the system will automaticallySell the stocks at the strike price of the Put option.。
If you do not want to sell the stocks using the Put option, you can choose to "Abandon the Option". This way, even if the options are in-the-money, they will not be automatically exercised, but you will also not receive any option exercise income.
If you hold American options, you can also choose to "Exercise Early" before the expiration, but this may result in a partial loss of the time value of the options. Therefore, it is usually not recommended to exercise early.
As the seller of a Call option, if the buyer chooses to exercise the option, you may be assigned the option by the clearing house.
The exercise will be completed by physical delivery. As you are constructing a Long Collar, hold the underlying stockThe system will automatically do so during the option exercise settlementSell the stocks at the strike price of the Call option.。
If you do not hold the underlying stock when the option is assigned, the system will automatically use the cash/margin in the account to buy the underlying stock for delivery.
If the cash/margin is insufficient, the system will automatically liquidate other assets in the account for the option delivery, which may result in unnecessary losses.
Therefore, it is recommended that youkeep an eye on the account statusand add adequate cash/margin as needed.
That's all for today's share.
The shared strategies above are mainly applicable to hedging the risk of nvidia stock price decrease 。
If you are more optimistic about the future stock price trend, you can close the position and switch to directional trading based on subsequent market trends, such as Call or Put options.
The above is the option chain for this period. Bullish mooers are welcome to share it with one click.
If you have any questions or want to learn more, please leave a comment in the comment section, and I will be happy to share more with you.
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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