A variation of an equity collar that allows the holder to increase either the downside protection or the upside potential of a zero-premium collar strategy. In so doing, the investor can pay an upfront premium, and this is what exactly help subsidize the collar. This strategy fits situations where a zero-premium collar strategy simply might not work well for investors weighing the downside protection against the upside potential, especially when they apply short-term strategies or use specific stocks that have low volatility and/ or large dividends.

A subsidized collar is also referred to as a debit collar.