How to structure a BTC collar: strike selection, tenor, and the upside budget

A collar on BTC reserves is, on paper, a simple structure: buy a put below spot, sell a call above it. The premium from the call offsets the cost of the put. What most programs optimise badly is the strike selection, because strike selection is a balance-sheet decision, not a premium optimization, and the two produce different strikes.

The put strike

The put strike should be set at the drawdown level the treasury cannot survive without policy action: not the drawdown the board considers likely, not the level that makes the most recent quarter look bad. The threshold at which the coverage ratio breaks, the financing window closes, or a covenant is triggered. That number comes from the balance sheet, not from a vol model.

Most programs set the put strike at a round percentage below spot (20%, 25%) because those are the numbers the desk proposes and they are easy to describe. A treasury that has modeled its forced-sale threshold will set a different number and will not move it when the desk pushes back.

The call strike

The call strike is the upside budget: how much of the reserve asset's potential appreciation the treasury is willing to forgo in exchange for eliminating the cost of the put. The framing matters. A board that chose to hold BTC as a reserve asset made a judgment that the upside mattered. A covered call strips that judgment partially out. The call strike should represent a level at which the treasury would be indifferent between participation and the cash equivalent of the premium received.

In practice, the call strike should be far enough out-of-the-money that it is not close to being triggered during ordinary moves. A call struck at 120% of spot in an asset with realised vol of 60% or more is not conservative; the expected terminal distribution reaches that level with meaningful probability within a standard tenor.

Tenor

Short-dated collars (30 to 60 days) roll frequently, accumulate transaction costs, and require continuous attention to strike re-anchoring as spot moves. Long-dated collars (six to twelve months) produce cleaner balance-sheet outcomes but are harder to source competitively and carry more theta exposure. The right tenor follows the liability profile: a maturity landing in six months argues for a collar terminating at or before that date; an evergreen reserve argues for longer.

When a put spread is better

A put spread (buy the at-risk put, sell a lower put) isolates the protection zone and preserves the full upside at the cost of a floor on the protection itself. For a treasury whose primary concern is a defined drawdown band rather than unlimited downside, a put spread is often better economics with fewer governance complications. The case for a collar over a put spread is when the board wants to demonstrably cap gross loss even below the sold-put strike, to satisfy an audit-committee mandate. That is a governance preference, not a market-structure preference. Both belong in the policy as named instruments.