Collars impose upside limitation of profits to the equity portfolio. That would be the major drawback against the primary objective of investing/trading, that causes a problem whether an astute investor/trader wants to use collars or not. Common investors/traders, who earn only small returns, could not afford to use collars. My personal guess is the practical use of collars would be usually limited to coporate hedging space.
Besides, the short (index) calls sold after getting into ITM just before explosive movements would have a rare/unusual risk of early exercise/assignment (of the short index options sold), that will cause an unexpected cash flow problem (as basically we don't want our cash sitting idle awaiting for this kind of rare/unusal - but realistic - sanario, practically) due to the margin on futures required for assignment. That would also leave the investor/trader (of exercised collars) an unwanted net position technically being long puts (due to the portfolio of stocks and the sold futures offsetting each other) during the day of bullish market movement.
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I think hedging can be simple (as currently proposed here) and can save good money if done correctly, or complex and cost great money if incorrectly.
This thread is trying to prove (with live calls) whether the currently proposed Simple strategy here can Save good money (plus Safety/Peace).
Just my 2 cents!
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