Collared LP Explained: Capped Upside, Floored Downside

A range above the line, a hedge that only arms on a confirmed flip, and a floor that is a floor — not a refund. This page explains the mechanic; it does not recommend running it.

// WHAT THIS IS

A collared LP is an LP position with a contingent hedge: the range sits above THE FRONT line, and the short hedge only turns ON if the trend flips bearish on a confirmed daily flip. In the middle, the position earns fees plus funding. The shape of the trade is a collar: upside capped at the top of the range, downside floored below the flip level — with real, uncovered loss between entry and that floor. This page explains the mechanic; it does not recommend running it.

Reading THE FRONTOPEN →

What THE FRONT, THE TURN and BULLISH mean, and what a confirmed flip is.

The full-hedge baselineOPEN →

The delta-neutral page this structure is a variation of.

// HOW IT READS ON THE GLASS

The WAR TABLE chart for XAU with THE FRONT toggled ON: THE FRONT line ringed and labelled the line where the hedge arms, the zone between THE FRONT and current price shaded as a page annotation, and the last confirmed flip level ringed, the level carried by the FLIPPED @ chip — the chart's record of THE TURN — // example — rates change constantly

The WAR TRENDS daily board with XAU's WAR DRUMS state badge reading BULLISH ringed and labelled the gate — // example — rates change constantly

The WAR BONDS band with its BASIS WARNING whole in frame and ringed in the risk colour, labelled the same warning class this structure inherits — // example — rates change constantly

// READ THE TREND // OPEN THE WAR TABLE

// THE THREE LINES THAT DEFINE THE COLLAR

THE FRONT — the arming line. People who run this structure watch the confirmed daily flip, not the intraday touch. Intraday pierces don't flip the read; a confirmed daily flip does. That lag is a feature (whipsaw resistance) and a cost (the flip confirms late).
The range top — the ceiling. Price running past the top of the range is upside the position does not capture. That is not a bug; it's the price of the floor. A collar trades away the tail.
The floor — a FLOOR, not a refund. This is the point most diagrams hide: the drop from entry down to the flip level is a real loss the hedge does not recover. The hedge arms AT the line — it never pays you back for the ride down to it.

// WHAT CAN GO WRONG

Gap risk — the BASIS WARNING in strategy form. Tokenized stocks trade market hours; perps trade 24/7. Price can gap straight through the trigger while one leg's market is closed — the hedge arms late, below the level the plan assumed. The BASIS WARNING on the WAR BONDS row is this exact fact wearing its product label.
Whipsaw around the line. Confirmed daily flips resist it but don't abolish it: a flip that confirms and reverses arms the hedge at the worst price twice. The anchor page's honest history shows at least one whipsawed flip — that's this risk on real glass.
The middle can underpay. Fees + funding in the band are the earnings engine; funding flips sign (see the carry page). A collar earning the honest floor of its projected range while paying funding on an armed hedge can net negative for stretches.
Complexity risk. Two mechanisms (range + trigger) means two ways to be wrong about configuration. Simpler variants exist — the dirty hedge page covers the blunt version.

// SEE THE FULL HEDGE

// THE MATH BOX

Range top [T] · entry [E] · THE FRONT level [L], all from the plate. Maximum capture ≈ [T]−[E]. Uncovered drop ≈ [E]−[L] — this is loss the hedge never refunds. Band earnings use the honest-floor range from the WAR BONDS row, labeled as the product labels it: a deliberately conservative fraction of the headline rate.

Example — rates change constantly.

// BACK TO THE SERIES