A combination of a zero-cost collar with a margin loan. This structure allows an investor to take most of the value out of a position without liquidating it. This strategy may be sought for tax reasons, i.e., to enhance the yield of low-tax-basis holdings, or for cash free-up purposes, i.e., to unlock the cash tied up in a position that cannot be liquidated due to lock-up agreements or similar restrictions. Typically, individual or institutional investors have, from time to time, significant equity holdings in publicly traded firms involving restricted or low-cost-basis stock. Therefore, it is of paramount concern for such investors to preserve and grow their equity positions.

Holders of unregistered stock, or other unsalable stock positions often seek liquidity, diversification, and tax minimization in preserving their equity holdings (such holdings are often acquired in the context of founding of a new company, from venture capital partnership distributions, as consideration in connection with mergers, acquisitions, buyouts, and compensation to senior managers, etc. Tax or regulatory constraints may hinder the diversification of such concentrated or restricted equity positions. Furthermore, traditional methods of locking in gains or diversification may also be unattainable or unavailable. Usually, holders of these securities can either sell under restricted conditions or simply hold and wait. Restricted stock positions are difficult to liquidate by traditional means, and here enter strategies such as monetizing collar, monetizing equity swap, short against the box, etc.

A monetizing collar can be constructed using either options and margin loans, an equity swap with an embedded collar and margin loans, or a prepaid forward with an embedded collar. The proceeds to the investor typically exceed those from a conventional margin loan.