The collar strategy is a strategy of financial options that consists of buying a sale optionand selling a purchase option , while you have the underlying asset. That is, it combines a protective put and a covered call .
There are several ways to form a necklace, but the most common is when we are in possession of the underlying and buy a put option and sell a call option to pay for the price of the put. That is, if the underlying is the action of a company we will have X shares of the underlying, X puts and – X calls. If the price of the premiums of the call and the put is the same we will have a necklace with zero cost.
This strategy is used when you do not want to sell the underlying asset and want to protect against an expected fall in the price, but you want to reduce the cost of that protection, which is done at the cost of losing profit if the price of the underlying rises.