Like other strategies, the collar can be leaned toward the
investor's perception of the stock's direction and strength.

Lets look at the potential leans that can be taken. Say that
you have a very strong feeling the XYZ is going to go up.
Instead of buying a put and selling a call with strikes that are
roughly equidistant from the stock price, you would sell a call
that is further out-of-the-money.

This would allow more room for a larger increase in stock price
because the stock would not be called away as early. You retain
ownership for a longer period of time during the increasing
price period.

Of course, by increasing the distance of the options strike
away from the stock, the amount of the call's premium will
decrease. The overall effect is that youll have to pay more to
own the position. (You will pay out more money for the put than
you will receive from the call.)

Again, we'll start with the same prices as in our original case,
(stock $28.00, Dec. 27.5 put $1.00 and Dec. 30 call $1.00) only
now we will change the Dec. 30 call at $1.00 to the Dec. 32.5
call at $ .35.

In our other examples, we incurred no debit or credit from our
option position. This time, with the bullish lean, a debit is
incurred. The purchase of the Dec. 27.5 put for $1.00 combined
with the receipt of $ .35 from the sale of the Dec. 32.5 call
produces a $ .65 debit.

Remember, this debit must be subtracted from the bottom line
profit or added to the bottom line loss of the stock's capital
result. This means that before you make any money from the
position, the stock must trade up $ .65.

If the stock stays stagnant you will lose $ .65, and any capital
loss you incur will be $ .65 worse. Now back to the position in
our previous example. With the selling of the Dec. 30 call, we
had an upside potential of $1.50. In this example things change.

As was stated, our maximum upside potential is calculated by
setting the stock price at the strike price of the short call
which is 32.5 in this case. With the stock at $32.50 at
expiration, you would have a $4.00 stock gain since the stock
was purchased for $28.50.

Remembering your $ .65 debit to enter the position, we subtract
that from the $4.00 and we have a total maximum profit of $3.35.
This is significantly more potential reward than our original
example using the Dec. 30 call.

As in all trading situations that offer a higher potential
reward, there comes a higher potential risk. If the stock stays
at $28.50, (the stagnant scenario) you have a loss of $.65 in
option costs. In the down scenario, calculating the maximum
risk is done by setting the stock price at $27.50 on expiration.

The stock, purchased at $28.50 has lost $1.00. The options, not
neutral, resulted in a $.65 loss. The total loss is $1.65. In
both the stagnant and down scenarios, the loss increased
over that in our original example. As you can see, the higher
potential gain is accompanied by an increased potential risk.