LONG FUTURES + LONG PUT + SHORT CALL
A collar converts open-ended futures exposure into a priced expiration band
A conventional collar protects a matched long futures position below a put strike and gives up gains above a higher call strike. Premium received from the call can offset some or all of the put premium, but the credit is payment for capped upside and a short-option obligation. The band lasts only through the chosen expiration.
THREE-LEG RECONCILIATION
Calculate net premium before quoting the floor or cap
Add commissions, spread and slippage to the economic cost.
Below the put strike, additional matched price decline is offset by put intrinsic value.
Above the call strike, additional futures gain is offset by the short call.
WORKED BAND
A “zero-cost” label can hide the economic price of the cap
Suppose futures entered at $4,000, a $3,900 put costs $35 and a $4,100 call receives $25. Net option debit is $10 per ounce before costs. The modeled downside result below $3,900 is a $110 loss per ounce, and the upside result above $4,100 is a $90 gain per ounce. The call credit lowered cash debit by $25 but also sold every dollar of upside beyond $4,100.
CONTROL CHECKLIST
Verify that both option legs cover the same futures risk
01Same underlying futures product and delivery month.
02Same option expiration for a simple three-region payoff.
03One-to-one contract ratios unless residual exposure is intentional.
04Executable call bid and put ask, not unrelated last prices.
05Written exercise, assignment and resulting-position instructions.
06Account liquidity for margin and early liquidation scenarios.
PRIMARY SOURCES & REVIEW BOUNDARY
Exchange education explains the structure; current contract and broker rules control execution
- CME Gold futures and options product page, Gold options contract page and Micro Gold options FAQ for the current product family and multiplier context.
- CME option strategies course with its official bull spread, bear spread, straddle, covered call and collar lessons.
- CFTC glossary for option, premium, spread, assignment, bid, ask, open-interest and volume terminology, plus CFTC Futures Market Basics and NFA investor resources for risk and intermediary due diligence.
Sources and links were reviewed August 2, 2026. Illustrations are not live quotes. Listed expirations, strikes, exercise provisions, fees, margins, position limits, liquidity and broker deadlines can change. Verify the current exchange rulebook and broker instructions before acting.
GOLD OPTIONS STRATEGY LAB
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Need the contract foundation first? Start with gold option calls, puts and expiration risk or the single-leg payoff calculator.
FREQUENTLY ASKED QUESTIONS
Gold futures collar questions
What is a collar on gold futures?
A basic collar combines long futures, a long put and a short call on the same intended underlying contract and expiration. The put limits downside below its strike while the call limits upside above its strike.
What is a zero-cost collar?
It is a label for a structure whose quoted call credit approximately offsets the put debit before fees. It is not economically free because upside is surrendered and execution, margin and assignment risks remain.
Can collar strikes be reversed?
Different strike orderings create different structures and may not provide the intended risk band. A conventional long-futures collar normally uses a lower put strike and a higher call strike.