MM53 - Collar with Confidence
Today I want to answer a question that just came up in the Kilo Club community, and it is one that is a little harder to type out than it is to show you, so I filmed a Market Minute for it. The question was simple. When I sell a collar, how do I fix it? What is my plan for it?
Here is the honest answer, and it is going to surprise some of you. I am not thinking in terms of repair when I set a collar. I have not had to repair a single one of my collars in years. I have also not been called away on any of my collars in years. I do not say that to impress you. I say it to impress upon you that when you master the art of setting a collar, your mind never goes to how am I going to fix this, because you have the confidence that you set it right the first time.
First, let me separate two things that get confused all the time. Selling a collar is not the same as selling a call. When I sell a short term call, that is an income play. I look for my positive 2 mean reversion, I wait for us to mean revert, I buy back the short call, and I am done. It is a short term income strategy. I teach that timeline in detail in MM45 Selling Calls and Timeline Rules, and inside Course 202.
A collar is a different animal entirely. When I am looking at a collar, I have a very specific thought in my mind. Has this stock gone too far too fast? Is there a very good chance it is going to have a meaningful correction where I can make some significant money? Is the risk reward there? I am not thinking about repair. I am thinking about whether the setup has earned my attention in the first place.
And that is exactly why I almost never have to fix one. The confidence does not come from a clever repair plan. It comes from the entry. That is where paper trading comes in. That is where practice comes in. Everyone who is good at anything practiced it. You did not just know how to tie your shoes at three years old. You did not merge onto the highway perfectly the first time. You practiced. Setting a collar is the same. So let me walk you through the actual collars I have set, and show you the one ingredient that made every single one of them so easy to walk away from and never worry about.