CMI Collar Strategy
CMI (Cummins Inc.), in the Industrials sector, (Industrial - Machinery industry), listed on NYSE.
Cummins Inc. is a global innovator in power solutions, responsible for the design, manufacturing, distribution, and maintenance of a broad array of diesel and natural gas engines, alongside cutting-edge electric and hybrid powertrains, and associated components. Its operations are strategically divided into five segments: Engine, Distribution, Components, Power Systems, and New Power. The company's extensive engine portfolio, available under the Cummins brand and others, powers a vast range of heavy and medium-duty applications, including commercial trucks, buses, recreational vehicles, light-duty automobiles, construction and mining equipment, marine vessels, railway systems, oil and gas operations, defense, and agriculture. Complementing these engines, Cummins provides both new and remanufactured parts and comprehensive servicing. Beyond its core engine offerings, Cummins delivers sophisticated power generation systems, high-horsepower engines, and specialized application engineering. It also offers custom-designed assemblies, retail and wholesale aftermarket components, and expert repair services conducted both in-shop and on-site.
CMI (Cummins Inc.) trades in the Industrials sector, specifically Industrial - Machinery, with a market capitalization of approximately $94.64B, a trailing P/E of 35.49, a beta of 1.24 versus the broader market, a 52-week range of 322.45-737.76, average daily share volume of 982K, a public-listing history dating back to 1947, approximately 70K full-time employees. These structural characteristics shape how CMI stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.24 places CMI roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. The trailing P/E of 35.49 is on the rich side, which tends to correlate with higher earnings-window IV expansion as the market debates whether forward growth supports the multiple. CMI pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a collar on CMI?
A collar pairs long stock with a protective out-of-the-money put financed by a short out-of-the-money call, capping both tails of the position around the current spot.
Current CMI snapshot
As of June 29, 2026, spot at $691.03, ATM IV 38.80%, IV rank 53.18%, expected move 11.12%. The collar on CMI below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 18-day expiry.
Why this collar structure on CMI specifically: IV regime affects collar pricing on both sides; mid-range CMI IV at 38.80% typically pushes the short call premium to roughly offset the long put cost, with a market-implied 1-standard-deviation move of approximately 11.12% (roughly $76.87 on the underlying). The 18-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated CMI expiries trade a higher absolute premium for lower per-day decay. Position sizing on CMI should anchor to the underlying notional of $691.03 per share and to the trader's directional view on CMI stock.
CMI collar setup
The CMI collar below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With CMI near $691.03, the first option leg uses a $730.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed CMI chain at a 18-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 CMI shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $691.03 | long |
| Sell 1 | Call | $730.00 | $9.80 |
| Buy 1 | Put | $660.00 | $11.00 |
CMI collar risk and reward
- Net Premium / Debit
- -$69,223.00
- Max Profit (per contract)
- $3,777.00
- Max Loss (per contract)
- -$3,223.00
- Breakeven(s)
- $692.23
- Risk / Reward Ratio
- 1.172
Max profit roughly equals short-call strike minus cost basis plus net premium; max loss roughly equals cost basis minus long-put strike minus net premium. Breakeven shifts by the net premium.
CMI collar payoff curve
Modeled P&L at expiration across a range of underlying prices for the collar on CMI. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | -$3,223.00 |
| $152.80 | -77.9% | -$3,223.00 |
| $305.59 | -55.8% | -$3,223.00 |
| $458.38 | -33.7% | -$3,223.00 |
| $611.17 | -11.6% | -$3,223.00 |
| $763.96 | +10.6% | +$3,777.00 |
| $916.75 | +32.7% | +$3,777.00 |
| $1,069.54 | +54.8% | +$3,777.00 |
| $1,222.33 | +76.9% | +$3,777.00 |
| $1,375.12 | +99.0% | +$3,777.00 |
When traders use collar on CMI
Collars on CMI hedge an existing long CMI stock position; the long put sets a floor while the short call finances it, often run as a near-zero-cost hedge during expected volatility windows.
CMI thesis for this collar
The market-implied 1-standard-deviation range for CMI extends from approximately $614.16 on the downside to $767.90 on the upside. A CMI collar hedges an existing long CMI position with a protective put while financing the put cost via a short call; when the premiums roughly offset, the collar acts as a near-zero-cost insurance band around the current spot. Current CMI IV rank near 53.18% is mid-range against its 1-year distribution, so the IV signal is neutral; the collar thesis on CMI should anchor more to the directional view and the expected-move geometry. As a Industrials name, CMI options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to CMI-specific events.
CMI collar positions are structurally neutral (protective); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. CMI positions also carry Industrials sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move CMI alongside the broader basket even when CMI-specific fundamentals are unchanged. Always rebuild the position from current CMI chain quotes before placing a trade.
Frequently asked questions
- What is a collar on CMI?
- A collar on CMI is the collar strategy applied to CMI (stock). The strategy is structurally neutral (protective): A collar pairs long stock with a protective out-of-the-money put financed by a short out-of-the-money call, capping both tails of the position around the current spot. With CMI stock trading near $691.03, the strikes shown on this page are snapped to the nearest listed CMI chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are CMI collar max profit and max loss calculated?
- Max profit roughly equals short-call strike minus cost basis plus net premium; max loss roughly equals cost basis minus long-put strike minus net premium. Breakeven shifts by the net premium. For the CMI collar priced from the end-of-day chain at a 30-day expiry (ATM IV 38.80%), the computed maximum profit is $3,777.00 per contract and the computed maximum loss is -$3,223.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a CMI collar?
- The breakeven for the CMI collar priced on this page is roughly $692.23 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current CMI market-implied 1-standard-deviation expected move is approximately 11.12%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a collar on CMI?
- Collars on CMI hedge an existing long CMI stock position; the long put sets a floor while the short call finances it, often run as a near-zero-cost hedge during expected volatility windows.
- How does current CMI implied volatility affect this collar?
- CMI ATM IV is at 38.80% with IV rank near 53.18%, which is mid-range against its 1-year history. Strategy selection depends more on directional thesis and expected move than on a strong IV signal.